Three Brokers Charged with Non-Disclosure of Outside Business Activity

Charles E. Taylor (CRD#: 443066), Jodi O. Padgett (CRD#: 1828918), John L. Farmer (CRD#: 5354041) are all registered brokers and General Securities Representatives with Royal Alliance Associates, Inc. (Royal) based in Prescott, AZ.

A November 15 FINRA regulatory decision alleges between 1999 and August 2016, the trio engaged in unapproved outside business activities. The brokers referred Royal customers to a dealer (GHI) to buy precious metal bullion coins. In return, each broker collected a referral fee. Taylor made at least 33 referrals and collected $10,081 in referral fees. Padgett made at least 8 referrals and collected $5,676. Farmer made at least 6 referrals and collected $4,663.

Royal policy does allow their representatives to conduct approved outside business activity. Brokers must notify the firm in writing on an outside business request form. By failing to disclose their outside activities, the three brokers violated firm policy and National Association of Securities Dealers (NASD) and Financial Industry Regulatory Authority (FINRA) rules. Royal’s Sales Practice Manual prohibits representatives from assisting a customer in the buying or selling of gold, silver, or precious metals.

Taylor is also accused of failing his duty as a supervisor. Padgett and Farmer were under his supervision when they undertook these undisclosed activities. Taylor did not check to see if his charges had disclosed their outside activities to Royal.

The FINRA decision affirms that the trio committed the violations and recommends monetary sanctions and payment of the proceedings costs.

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