Lincoln Financial Advisors says it wants to be the country’s “premier fee-based financial planning firm.” A recent decision by the Financial Industry Regulatory Authority’s (FINRA) Enforcement Department suggests that the firm is off to a rocky start. FINRA sanctioned former registered rep and investment advisor William Babb III with “trading away” and failure to cooperate in an investigation.
Trading away occurs when a broker sells securities not disclosed to or approved by the firm. Because brokerage firms are responsible for the conduct of their agents and representatives, it is important that they know what their agents are doing and saying.
As a financial planning firm, Lincoln Financial has an obligation to only recommend suitable investments to its customers. Because Babb was also an investment advisor, the duty is even higher. Brokerage firms usually have professional staff or analysts that can conduct due diligence reviews on prospective investments. The system breaks down, however, when individual employees make recommendations not approved by the firm.
This seems to be what Babb did at Lincoln Financial. It is hard to tell, however, as regulators claim that Babb refused to participate in the investigation. What we can glean from the complaint is that in 2001, Babb received permission to invest his own funds in a private equity. Later in 2012, Lincoln Financial learned that he had also solicited his clients to invest in the same entity. It is unclear if any customers lost money, however, customers making money rarely complain.
Although Babb did not cooperate in the investigation, he did consent to being barred from the securities industry. In consenting to the sanction, he was not required to admit any wrongdoing. For its part, Lincoln Financial Advisors was not charged with any wrongdoing. They followed proper procedures and terminated Babb when they learned of the violations. (FINRA regulations prohibit representatives from recommending or selling investments away from their firm or unapproved securities.)
Babb isn’t the first stockbroker or financial planner to be accused of selling unapproved investments. Customers who purchased these investments may be able to recover their losses, however. Even if the agent selling the investment is broke or has disappeared, his or her former employer may still be liable.
If you lost $100,000 or more because of a stockbroker, investment adviser or other financial professional, give us a call. The stockbroker fraud lawyers at Mahany & Ertl have helped many investors get back their hard earned money. We also take cases involving other frauds including legal and accounting malpractice. Most cases can be handled on a contingent fee basis meaning no legal fees unless we recover money for you.
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