The Sonn Law Group is currently investigating claims pertaining to Patrick D. Combs, a registered financial advisor who was previously employed by Morgan Stanley. Investors need to be aware of misconduct allegations against this broker. FINRA recently suspended this individual from the industry for seven months.
Without admitting or denying any wrongdoing in the proceedings, Mr. Combs consented to this suspension, as well as to a $7,500 fine. Full information on this broker can be obtained used FINRA’s free BrokerCheck tool (CRD#: 2720909).
Misconduct Allegations Against Patrick D. Combs
In 2012, Patrick D. Combs was based in Southlake, Texas. At that time, an acquaintance, who had professional ties to a private sports drink company, approached Mr. Combs seeking to do business with him. Specifically, this individual wanted to know if Mr. Combs, himself a retired professional baseball player, knew of any professional athlete who wanted to invest in the sports drink company.
The individual was also looking for a marketing arrangement with an athlete. Eventually, Mr. Combs agreed to set up a meeting between this individual and a professional athlete whom he represented at Morgan Stanley.
On August 10th, 2017, the Morgan Stanley client agreed to invest $500,000 in the sports drink company. However, at no point did Mr. Combs ever inform Morgan Stanley that he was facilitating this private securities transaction between one of his clients and an outside company. Indeed, Morgan Stanley had no knowledge of the transaction at all.
This was true despite the fact that, pursuant to industry regulations, Morgan Stanley required Mr. Combs to fill out an annual disclosure statement regarding private securities transactions. On that disclosure questionnaire, Mr. Combs falsely answered ‘no’ to all questions asking if he had engaged in any private securities transactions.
Broker Misconduct: Selling Away
Brokers who engage in private securities transactions without going through their employer are committing an offense known as ‘selling away’. This type of practice is a direct violation of FINRA Rule 3280. This rule requires all FINRA associated individuals to report all transactions to their employer.
The guiding principle behind this rule is simple: Selling away exposes customers to investment opportunities that have often not been properly vetted. Brokerage firms have a fiduciary duty to protect the best financial interests of their clients. Under Rule 3280, once a private transaction is reported to a broker-dealer by one of its employees, that firm will then bear responsibility for overseeing the trade.
Far too often, private transactions that have been hidden from brokerage firms are unsuitably risky and are subject to unreasonably high investment fees. Brokers must avoid engaging in any private securities transactions without properly reporting the trade.
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At the Sonn Law Group, our securities fraud lawyers have helped many wronged investors recover full and fair compensation for their losses. We handle claims on a contingency fee basis, meaning there is no fee unless we help you obtain financial recovery. For more information, you can reach our team today via email or by calling us at 844-689-5754.