On Jan. 27, 2023, the Financial Industry Regulatory Authority (FINRA) announced that former Texas-based Stifel, Nicolaus & Co. broker Robert Earl Turner had been permanently barred from association with any FINRA member in all capacities. Turner was registered as a General Securities Representative at UBS Financial Services from 1996 through 2021.
FINRA’s decision to bar Turner was made based on a regulatory tip it received. In the fall of 2021, one of Turner’s clients sought to withdraw her investment, which she believed to be worth $450,000, from Fairfax Financial Corporation, an entity with which at least 30 of his customers invested a total of $7.2 million. In November of that year, UBS filed an Amended Uniform Termination Notice for Securities Industry Registration (Form U5). The notice disclosed that the firm had begun an internal investigation due to concerns surrounding disbursements on investment options not offered by UBS.
In April 2022, UBS filed another Amended Form U5 after the firm determined that Turner knowingly had his clients send funds to a fraudulent entity.
Without admitting to or denying the findings, on Jan. 25, 2023, Turner consented to the sanction and to the entry of findings that he “participated in private securities transactions without providing prior written notice to his member firm before participating in the sale of fixed annuities that were outside the scope of his employment with the firm.” These “fixed annuities” were actually securities, and Fairfax was not a licensed insurance company. Moreover, Fairfax was not licensed or authorized to sell fixed annuities during the period when Turner sold them. Read the full BrokerCheck report here.
Are brokers allowed to sell securities not offered by their brokerage firm?
According to Investopedia, “selling away” refers to when a broker solicits a client “to purchase securities not held or offered by the executing brokerage firm.” Usually, firms have set product lists that brokers can offer clients. Approved products like these have undergone due diligence screenings to ensure that they are quality investing tools.
In its “Obligations to Your Firm,” FINRA notes that brokers may conduct a securities business as an agent “only while under the direct supervision of your firm.” Brokers cannot participate in securities transactions away from their firm unless they have written approval to do so (FINRA Rule 3280).
Based on the allegations detailed by FINRA, on several firm compliance certifications Turner falsely attested to understanding and agreeing to comply with the UBS prohibition on selling away. However, as FINRA alleged, Turner went to great lengths to conceal his involvement in selling the Fairfax “fixed annuities,” which he knew were not firm-approved products. He also allegedly directed his Fairfax contact, who also happened to be a friend from college, to send copies of annuity statements to a personal P.O. Box as opposed to the firm’s office.
What is a broker’s obligation to you, the customer?
FINRA Rule 2010 dictates that members shall observe “high standards of commercial honor and just and equitable principles of trade” in conducting business.
Financial advisors should disclose potential conflicts of interest, like close friendships. Financial advisors also must not mislead customers by way of their own representations. Again, as detailed by FINRA, Turner’s clients believed that they would earn a fixed, guaranteed rate of return based on quarterly annuity statements, but—instead—they lost most, if not all, of their investments made with Fairfax.
We can help.
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.