A Financial Industry Regulatory Authority panel has ordered Lincoln Financial Advisors Corp. to pay $4.43 million in damages and interest to about 22 investors that had accused brokerage manager Scott B. Gordon of “selling away.” The panel wrote in its decision that the brokerage firm was “negligent” in failing to prevent Gordon from using an outside business to raise money from investors. The alleged misconduct took place for almost a year.
“Selling away” involves a broker soliciting clients to purchase securities not offered by his/her broker-dealer and without the brokerage firm’s approval. Regulators consider “selling away” to be a violation of securities laws.
Gordon became software-development company Healthright Inc.’s chief executive in 2005 and ran the company from his Lincoln Financial office. Two Healthright investors sent a written complaint to Lincoln the following year.
A request by Gordon to the brokerage firm that he be able to conduct outside business activity was not approved or denied. In 2006, Grant Gifford, who is a Healthright investor and a claimant in the securities fraud case, discovered alleged misstatements and omissions that Gordon had made. In 2008, FINRA barred Gordon from the securities industry.
Except for Gifford, who lent money to Healthright in his personal capacity, all the other investors in the securities case against Lincoln were part of Healthright Partners, LP.
Related Web Resources:
Finra Panel Orders Lincoln to Pay $4.3 Million to Investors, The Wall Street Journal, October 7, 2010
Lincoln Financial hit with hefty arbitration award over selling away, Investment News, October 5, 2010
Activity Away From Associated Person’s Member Firm, FINRA
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