[ by Melanie Gretchen, Howard Haykin ]

A Texas broker agreed to settle FINRA charges related to outside business activities.  The broker had entered into an agreement to sell life settlement insurance policies without providing notice to, or requesting permission from, his member firm.  He never sold a single policy, but he did refer a firm client to another agent, who made a sale. 

Respondent's Professional Background.   Eric Bludau entered the securities industry with PlanMember Securities, Inc. in 2002, working in the Hallettsville, TX, office.  He remained there until his termination on 7/22/11.  Bludau held Series 6, 63, and 65 licenses. 

FINRA Findings and Allegations.  Between November 2008 and December 2008,  Bludau allegedly entered into an agreement to sell life settlement insurance policies.  He did so with National Life Settlements (NLS) products.  Such activity would constitute outside business activities - and he, in fact, received compensation, but failed to provide notice to, or request permission from, his member firm. 

Although Bludau did not distribute the NLS sales literature or recommend the NLS products to his customers, he knowingly referred one of his customers to another agent and knowingly accepted compensation from the other agent's sales of NLS products.  As such, Bludau was participating in the sale of securities without first obtaining his member firm's permission.  Bludau received $5,537 in referral fees from the completed sale of at least $226,000 in life settlement products. 

Alleged Violations and FINRA Sanctions.   FINRA charged Bludau with violating NASD Rules 3040 and 2110, and FINRA Rule 2010, by participating in a private securities transaction and failing to uphold high standards of commercial honor and just and equitable principles of trade. 

Bludau settled the FINRA charges, agreeing to a $10K fine and a 30-day suspension.  FINRA member in any capacity for 30 days. 

Postscript.   In February 2009, the State of Texas filed suit against National Life Settlements, accusing the firm of issuing note agreements that were fraudulent securities distributed through false and misleading sale practices.  The state received an immediate injunction and placed all remaining company assets into receivership.   It would appear that Mr. Bludau has left the securities industry. 

For further details, go to [FINRA Case #201002361238] and [Disciplinary and Other FINRA Actions, October 2012].