Can a Financial Advisor Recommend Outside Investments That are Not Offered Through His or Her Employing Brokerage Firm?
The Financial Industry Regulatory Authority (FINRA) strictly prohibits financial advisors from selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.
The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.
How Do I Know if My Financial Advisor is Selling Away?
If you have concerns that a financial advisor has recommended a private securities transaction, you should first carefully review your account statements and trade confirmations. In most instances, every investment you have purchased through a brokerage firm will be reflected on your account statements. If you have not received any account documentation from your brokerage evidencing the purchase, sale or market value of the investment in question, it is possible that your financial advisor has engaged in selling away.
Has Your Financial Advisor Recommended Private Investments?
The Wolper Law Firm has extensive experience handling matters involving private securities transactions and selling away. If you believe that your financial advisor has engaged in such conduct, please contact the Wolper Law Firm for a free consultation and case evaluation.