The big news last week in the securities industry was the apparent termination of James “Jeb” Bashaw, a legendary stockbroker most recently employed by LPL Financial. Several years ago, Barron’s magazine ranked Bradshaw as the top financial adviser in Texas with a client portfolio of almost $4 billion. When we checked with FINRA last week, there was little public information as to why he was terminated. Today InvestmentNews says he was let go for selling away.
In recent years we have written several stories about selling away. This occurs when a broker solicits you to purchase securities not offered by the broker’s employer. Generally these activities violate industry regulations and the brokerage firm can be held responsible for the products sold by their broker even if the firm had no knowledge of them.
In our experience, when a broker is selling away, the products offered are typically private placements, alternative investments or exotic insurance products tied to securities.
InvestmentNews today reported that Bradshaw participated in private securities transactions without “providing written disclosure to and obtaining written approval from LPL. The report also says he borrowed money from a client and was involved in a business transaction that created a conflict of interest.
Last week when Bashaw’s termination was first reported we checked his record with FINRA’s BrokerCheck system. It revealed two small complaints; one in 2012 and one in 1990.
It’s a big deal when a brokerage firm loses a billion dollar producer. There are very few in the industry. Unfortunately, the allegations raised about Bradshaw are also a big deal. When stockbrokers get in trouble, it is often for selling away.
Recently we learned of a stockbroker / insurance agent who was selling interests in a Ponzi scheme operated by Nikolai Battoo. After investigating the claims it became very apparent to us that the brokerage firm employing him had no idea of what he was doing. That is a big problem for brokerage firms as they remain responsible for the activities of their agents.
There is no suggestion that any customer lost money because of Bashaw. Still, this story serves as an important reminder that brokerage firms can be held responsible for he actions of their agents.
The author, Brian Mahany, is a fraud recovery lawyer. Questions and comments are welcome. Please contact him at or by telephone at (414) 704-6731 (direct)