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Regulatory Sanctions

Light Sanctions ($5K, 3 Months) for Untrustworthy Broker with Extended Outside Business Activities

June 28, 2019

by Howard Haykin


Let me say up front: Based on the facts as presented by FINRA, I don’t like this broker, I don’t trust this broker. And in settling this case, I would have doubled his suspension (to 6 months) and required him to recertify his Series 7 General Securities Representative license.



For more than 4 years, this broker failed to notify Wells Fargo Clearing Services (“WFCS”) about the full nature of his participation in 3 outside business activities (“OBAs”) - in particular, his efforts to solicit investments in those activities, which WFCS explicitly prohibited. Two of the broker’s notices to the firm about those OBAs were also untimely. By virtue of this conduct, the broker violated FINRA Rule 3270 (Outside Business Activities of Registered Persons) and consequently FINRA Rule 2010.



IN NOVEMBER 2012 …  the broker began engaging in an OBA, a company he helped to found, Agriplas LLC. He notified WFCS about that activity but described his role for Agriplas as merely "[a]dvis[ing] business management on how to best design and sell crop yield enhancement devices utilizing plasma." WFCS allowed the broker to participate in Agriplas, provided that he did not solicit investments in the company.

However, on at least 5 occasions from June to December 2013, the broker arranged and participated in meetings with potential investors in Agriplas without notifying WFCS.



IN DECEMBER 2013 …  the broker founded another company (Atlas Agriculture Systems – OBA #2) that he led as its CEO.

In January 2014, he told WFCS that Atlas was a "reformed" incarnation of Agriplas, though he didn’t notify WFCS about the full nature of his role with Atlas. One month later the broker attempted to raise capital for Atlas without notifying WFCS.


FOUR MONTHS LATER…  the broker finally notified WFCS about his role as CEO. WFCS allowed him to participate in Atlas, provided that he didn’t solicit investments in the company.

The broker subsequently tried to raise $4 million for Atlas, again without notifying WFCS.



IN JULY 2016 …  the broker founded another company (HydroNOx – OBA #3) that he led as its CEO.

The broker waited 6 months before notifying WFCS about this company and his role as CEO.
Though WFCS refused to allowed him to participate in HydroNOx, the broker, nonetheless, continued to work for HydroNOx for at least 5 more months, helping to prepare presentations for potential investors and crafting a proposal for raising capital for the company, all without notifying WFCS.



FINANCIALISH TAKE AWAYS.    In mid-2017, WFCS discovered the broker’s undisclosed participation in his OBA and terminated its association with him. FINRA then conducted its own investigation, which led to the noted sanctions ($5K fine and 3-month suspension) - which I believe were too lenient. I'm guessing that FINRA inappropriately credited this broker for: (i) having notified the firm that he was engaged or engaging in OBAs; and, (ii) the fact that none of his attempts to raise capital for these companies resulted in any securities transactions.


In any event, because this broker lied and operated in a deceitful manner for more than 4 years by being less than truthful and by disobeying firm orders - he showed that he cannot be trusted – which, in the financial services business should be grounds for a ‘kiss of death” sentence.   

This case was reported in FINRA Disciplinary Actions for June 2019.

For further details, click on ...  FINRA AWC #2017056005701.