FINRA fined and suspended Jamie Silber Bennett, CCO of Silber Bennett Financial of Encino, California, for failing to review or capture representative e-mails. The investigation found that Bennett failed to review e-mail conversations belonging to a representative who happened to be engaged in an undisclosed outside business activity, wherein he solicited investments.
In AWC #201504720102, investigators concluded that while Bennett (CRD #2740248) failed to abide by FINRA rules in not reviewing the e-mails, if he were to have reasonably reviewed the Silber Bennett Financial representative's correspondence, the firm may have been able to discover the outside business activity misconduct.
FINRA also found that Bennett frequently used a third-party e-mail account instead of his firm account to conduct firm business. When investigators asked Bennett for his business-related, third-party e-mails, he failed to produce all of them, thus failing to retain his own e-mail messages.
Failing to capture, maintain, and review business-related e-mails can lead to the situation described above: allowing a broker to engage in misconduct, such as selling away or conducting undisclosed outside business, without supervision and without detection.
For instance, when FINRA suspended Howard Lawrence Hull of Newport Coast's HLH Securities in 2017, investigators found that at least 21 private securities transactions at HLH were unsupervised, unrecorded, or inadequately supervised. FINRA also found that the firm failed to establish procedures to review outside business activities.
Given the great potential for harm due to undisclosed outside business activities and selling away—such as Scott A. Kohn's Future Income Payments (FIP) Ponzi scheme targeting retired pensioners and elderly investors—something so innocuous as failing to preserve e-mails or using a Gmail or Yahoo address instead of a firm address can prove catastrophic.
For this reason, it is important to note that broker-dealers may be held liable for selling away losses caused by their stockbrokers, as we discovered was the case with Quest Capital and the $1.2 billion Woodbridge Group of Companies Ponzi scheme.
If you have invested with Jamie Silber Bennett, his firm Silber Bennett Financial of Encino CA, or with any broker or financial adviser who has solicited investments away from a FINRA-registered firm, or whose undisclosed outside business activities has proven harmful to your interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.