Sonn Law Group is investigating claims related to Frank John Capuano (CRD #844182, West Springfield, Massachusetts). Capuano was associated with Royal Alliance Associates, Inc., from November 1989 until July 2015. Capuano was permitted to resign from the Firm on July 9,2015 following a review of, among other things, the private securities transactions described in FINRA Disciplinary Case No. #2015046273001, according to FINRA. Capuano recently submitted an AWC in which he was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in any capacity for 12 months. The suspension is in effect from May 2, 2016 through May 1, 2017.
Without admitting or denying the findings, Capuano consented to the sanctions and to the entry of findings that he engaged in undisclosed and unapproved private securities transactions. FINRA found that between December 2014 and March 2015, Capuano violated FINRA rules by engaging in undisclosed and unapproved private securities transactions totaling more than $ 1.1 million. In particular, in late 2014, Capuano learned of a private investment opportunity in a family of funds offered as the Woodbridge Mortgage Investment Funds (“Woodbridge Funds”), according to FINRA. FINRA found that Capuano offered and sold approximately $1.1 million in notes to customers of his member firm, all of whom were his close friends and family, and purchased $55,000 of the notes for himself and his wife. FINRA also found that Capuano received over $34,000 in commissions in connection with these transactions. Further, FINRA found that Capuano failed to seek or obtain approval from his firm before participating in these private securities transactions, nor did he disclose them to his firm.
What is Selling Away?
FINRA Rule 3280(b) states:
Prior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.
Subsection c goes on to state that unless the broker’s firm approves the broker’s participation in the transaction “the person shall not participate in the transaction in any manner, directly or indirectly.”
When a broker sells you a security that is not held or offered by the brokerage firm with which he/she is affiliated this is known as “selling away.” Generally, brokers may participate only in the sale or solicitation of securities approved by their FINRA member firm. Selling away often involves promissory notes, investment in small businesses or start up ventures, private placements, real estate partnerships, and other investments which do not trade on an exchange.
Firms are responsible for supervising the activities of their brokers. See FINRA Rule 3110. Thus, the firm may be held liable for losses related to a private securities transaction, aka selling away, even if your broker has sold the investment without his/her firm’s approval.
If you were a client of Royal Alliance Associates, Inc., or Frank Capuano and have experienced investment losses or financial irregularities, please call us at 844-689-5754 or complete our “contact form.” Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.