The Financial Industry Regulatory Authority (FINRA), the self-regulatory
agency that regulates brokerage firms and their employees, announced that
now-former financial advisor Jerry Lou Guttman has been permanently barred
from associating with any securities firms in any capacity.
According to documents released by FINRA, Jerry Guttman participated in
“private securities transactions” without first providing
notice to his supervising brokerage firm, as mandated under securities
industry rules. Specifically, according to the AWC released by FINRA,
FINRA alleges the following:
During the period September 2008 through May 2017, Guttman sold more than
$7,000,000 worth of membership interests in at least six different limited
liability companies to 31 Firm customers and seven non-customers without
first disclosing the sales to United Planners. Guttman participated in
the sales of these membership interests to Firm customers and non-customers
by: (1) soliciting the membership interests to investors; (2) communicating
with investors about their investments; (3) drafting, distributing, and
collecting the investment agreements from each investor; (4) collecting
and depositing investors’ checks into the companies’ bank
accounts; and (5) managing the companies as one of only two managing members.
United Planners is a FINRA-registered broker-dealer headquartered in Scottsdale,
Arizona. Mr. Guttman’s CRD report indicates that he was terminated
from United Planners in September 2017 for selling unapproved interests
in Serenity Cemeteries.
NASD Rule 3040 and its successor FINRA Rule 3280 requires associated persons
to provide a registered representative’s firm with written notice
before participating “in any manner in a private securities transaction”.
NASD Rule 3040 and FINRA Rule 3280 define a private securities transaction as,
“any securities transaction outside the regular course or scope of
an associated person’s employment with a member [firm].”
A violation of NASD Rule 3040 or FINRA Rule 3280 is also a violation of
NASD Rule 2110 and its successor FINRA Rule 2010, which require members,
in the conduct of their business, to observe high standards of commercial
honor and just and equitable principles of trade.
Brokerage firms often argue that a broker who violates these rules is “selling
away” from the firm and that the firm cannot be held legally responsible
for the improper sales that were not properly disclosed to the firm by
the broker. However, simply because a brokerage firm may be unaware of
its broker’s misconduct does not absolve the firm of liability.
Securities industry rules require brokerage firms to implement policies
and procedures that are reasonably designed to detect and prevent violations
of industry rules, including rules relating to unapproved securities sales
by brokerage firm employees to the firm’s customers. If it can be
shown that a brokerage firm failed to reasonably supervise its brokers,
then the firm can required to pay its customers for losses they suffered
arising from the unapproved sales.
The investment fraud lawyers at the law firm of Meyer Wilson have represented
hundreds of investors who were sold unapproved securities by unscrupulous
brokers and have recovered millions of dollars on behalf of their clients.
If you have questions about a potential case involving stockbroker misconduct, please
contact the experienced lawyers at Meyer Wilson for a complimentary consultation and case evaluation.