A customer dispute filed on 5/21/2021 alleged that a promissory note investment Beebe recommended had a conflict of interest. The customer believed that the investment was a scam, was not in her best interests, and that it was from a company that Beebe was also personally involved with. The claim was settled for the $50,000 in damages that the customer requested.
This dispute led to LPL Financial’s dismissal of Beebe on 9/21/2021 for allegations that he, “participated in private securities transaction without prior disclosure to, or approval from Firm.” These dealings are also known as “outside business activities,” or OBA. Most broker-dealers require written permission for their brokers to participate in most types of work activities outside of their firm employment.
FINRA began its own investigation into Beebe’s activity and sent him letters requesting information. Beebe failed to respond to these letters, and FINRA issued two letters of Suspension and Suspension from Association, dated 4/13/2022 and 5/9/2022, respectively. On 7/18/2022, after Beebe failed to request termination of his suspension withing the three-month period following the letter, FINRA’s suspension became an indefinite bar from association with any FINRA broker-dealer member in all capacities.
Why Is OBA A Problem For Brokers, Broker Dealers, And Their Clients?
Brokerage firms commit time for due diligence for each financial product they offer to their clients. They need to make sure that anything they offer is good for their clients while taking each client’s investment objectives and risk tolerances into consideration.
Occasionally, a broker may request permission from their firm to handle a particular security for a client if it is in the client’s best interests. The firm may or may not give the broker that permission, depending on what they find during vetting.
Unfortunately, some brokers do not follow those rules. When a broker offers and sells an outside security to a client, their employer firm has not vetted, cleared, or given permission for the broker to sell the product. While some of these outside business dealings may be fine, they can be dangerous to both clients and the broker dealers that didn’t know about them.
When an outside placement goes wrong, the investor may lose their investment. In this client’s case, the firm settled the claim for the amount of the loss. That may not always be the case. An investor may have to go through FINRA arbitration, file a lawsuit, or even file criminal charges against the broker. This will depend on the circumstances of the case.
Should you discover that your broker has sold you a non-approved investment, speak with an experienced securities law attorney to learn about your legal options before taking any action.
Did You Invest With Michael Beebe?
Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.