What is Selling Away? Selling away occurs when a broker sells or solicits private investments that have not been approved by their affiliated broker-dealer. This practice is problematic and often illegal because it bypasses the broker-dealer’s internal controls and risk assessments, exposing investors to potentially high-risk or fraudulent investments without the necessary oversight. Individuals affected by selling away may find themselves entangled in investments that are unsuitable or outright scams.
FINRA Regulation of Selling Away The Financial Industry Regulatory Authority (FINRA) strictly regulates broker activities, including prohibiting selling away practices. According to FINRA rules, brokers must receive formal approval from their broker-dealers before soliciting or selling any investments. These regulations are designed to protect investors from unauthorized and potentially harmful financial activities that could lead to significant losses. Brokers who engage in selling away are subject to disciplinary actions, including fines, suspension, or permanent bans from the industry.
How Selling Away Works Selling away typically involves a broker proposing an investment opportunity to clients that is not listed or approved by the brokerage firm with which they are affiliated. Often these investments are private placements or other non-traditional investment vehicles. The broker may present these opportunities as having high return potentials, playing down the associated risks or failing to disclose them entirely.
Example of Selling Away For instance, a broker might approach a client with an opportunity to invest in a start-up company or real estate venture. The broker assures the client of substantial returns, citing their personal belief in the venture’s success. However, the investment is not on the list of approved products offered by the broker’s firm and has not undergone the firm’s due diligence process. The client, relying on the trust established with the broker, agrees to invest, unaware of the lack of official oversight and potential risks involved.
How to Detect Selling Away Detecting selling away requires vigilance on the part of the investor. Here are some signs that may indicate a broker is engaging in this practice:
Unlisted Investments: The investment is not listed among the broker-dealer’s approved products. Lack of Documentation: There is insufficient or no official documentation or disclosures from the broker-dealer regarding the investment. Pressure to Invest: The broker may use high-pressure tactics or urge secrecy, suggesting that the investment opportunity will not last long. Unusual Procedures: The payment for the investment is directed to an account not officially associated with the broker-dealer. Contact a Selling Away Fraud Lawyer If you suspect you’ve been a victim of selling away, it’s crucial to seek legal advice promptly. Silver Miller is experienced in handling cases of selling away fraud, helping clients recover their investments and hold the responsible parties accountable. Our skilled attorneys can offer you the guidance and representation needed to navigate the complexities of investment fraud.
If you believe your broker has engaged in selling away, or if you have suffered losses from unauthorized investments, contact Silver Miller. Our team of experienced selling away fraud lawyers will help you understand your rights and options for recovery.
