On Dec. 8, 2022, the Financial Industry Regulatory Authority (FINRA) permanently barred former New Jersey-based Monmouth Capital Management, LLC broker Caz Craffy from association with any FINRA member in all capacities. Prior to working as a broker at Monmouth Capital, Craffy worked for Newbridge Securities Corporation and the National Securities Corporation.
In November 2022, FINRA began an investigation into Craffy’s failure to disclose his involvement in outside business activities as the result of a customer complaint. According to BrokerCheck, Craffy not only acted as a broker but also served as company commander in the US Army Reserve; CFO of SLUSA Productions, a creative digital media agency; founder of Overwatch Global Strategies, a financial consultancy firm; and financial counselor for the Department of the Army.
In addition to engaging in outside business activities, the investigation also sought to examine complaints regarding Craffy’s potential conversion of customer money, loans or gifts from clients, and active trading in client accounts. Without admitting to or denying the findings, Craffy consented to the sanction and to the entry of findings that he “refused to appear for on-the-record testimony requested by FINRA during the course of an investigation.” Read the full BrokerCheck report here.
In February 2023, a customer filed a dispute alleging Craffy engaged in negligence, common law fraud, breach of contract, breach of fiduciary duty, and unjust enrichment while employed at Newbridge and Monmouth Capital. The dispute is still pending.
Are brokers allowed to engage in other business activities?
In the simplest sense, outside business activities include paid work beyond the scope of a broker’s professional employment. FINRA Rule 3270 states that “no registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member.”
FINRA rules exist to protect customers. In the case of outside business, FINRA is most concerned with ensuring that nothing interferes with the securities professional’s duty to his/her client. By requiring brokers to disclose their outside business activities to their firms, both the firm and the advisor’s customers are given the benefit of transparency regarding any potential conflicts of interest.
As a customer, what obligations does my broker have to me?
FINRA Rule 2010 dictates that members shall observe “high standards of commercial honor and just and equitable principles of trade” in conducting business. Moreover, FINRA Rule 8210 states that, for the purposes of investigating complaints, adjudicators or FINRA staff have the right to require a member, person associated with a member, or anyone else subject to FINRA’s jurisdiction to provide relevant information and/or testify under oath. Failing to disclose outside business activities and refusing to participate in the investigation or provide testimony violates both rules.
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If you or someone you know has lost money because of broker or financial advisor misconduct, Lance McCardle and his team of experienced investment fraud lawyers can help. Our firm has helped hundreds of clients recover their losses due to broker fraud or negligence. Contact us today.
