Regulators Focusing On

"Selling away", or the selling of financial products that the broker-dealer did not know about or approve, has been on the rise according to the North American Securities Administrators Association (NASAA) and Investment News. The frequency of these claims has increased as brokers peddle investment products that promise high returns in highly volatile market that lost 12% in the last quarter.

There were some 54 reported cases against members of the securities industry in 2010, ranking eight out of ten in securities industry violations not involving fraud. "Selling away" is a big problem for independent and franchisee broker-dealers who have small one or two man offices, with nobody overseeing their daily operations. Most of those offices are only visited occasionally by supervisory and compliance personnel to perform an office inspection.

Recently, Edward jones, Raymond James Financial Services Incorporated and Woodbury Financial Services Incorporated have been investigated for "selling away." Specifically, a couple of former Edward Jones brokers out of South Dakota were in the sights of the FBI for their part in an alleged Ponzi scheme operated by Gibraltar Partners Incorporated out of New York. In another case, the U.S. Securities and Exchange Commission (SEC) tapped a former Raymond James Financial broker, Thomas Keough, with peddling unregistered promissory notes involving some $110 million. The scheme that involved a subprime automobile lender and hundreds of investors, guaranteed investors returns of somewhere between 9% and 15%, according to the article. Finally, Joshua Gould who had been with Woodbury Financial, ended up being sent to prison for 97 months for "selling away", among other things where he made promises of increased returns on "unconventional" investments.

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