Broker Malcolm Babin has been barred by the Financial Industry Regulatory Authority (FINRA) following a refusal to cooperate during an ongoing investigation of Babin by FINRA in July 2015. Babin, a Series 6 licensed broker, was being investigated by FINRA for allegations of conversion of customer funds and undisclosed outside business activities. In May 2015, Babin had been terminated from PFS Investments for allegations of “selling away,” which is prohibited by FINRA Rule 3040.
“Selling away” occurs when a broker buys, solicits or sells securities which have not been approved or recorded on the broker’s affiliated firm books. The most common form of securities sold away are private placements and promissory notes. Because both are securities, which are not required to be registered with the Securities and Exchange Commission (SEC), such investments are riskier because of lack of SEC and FINRA oversight and often turn out to be scams.
Under FINRA rules, the brokerage firm with which Babin was employed, was required to properly monitor and supervise its brokers and have internal supervisory procedures in place designed to detect improper conduct and interaction with the public.
Investors, who have suffered losses as a result of Babin’s fraudulent conduct, may be able to recover same through securities arbitration. This is accurate even when an investor did not end up opening an account with Babin’s firm. Any brokerage agreement has an Arbitration Clause present as a means for dispute resolution, which allows defrauded investors to seek restitution of losses and compensation. FINRA Arbitration can take as little as nine months and the rules of discovery and evidence are more relaxed than in a civil litigation.
Article Type: Investigation
Topic: Investments
