FINRA fined PFS Investments $60,000 for failing to enforce a supervisory requirement that its representatives disclose outside business activities to the firm in writing, despite specifically receiving notice that three of its registered representatives co-owned and operated an outside business.
The report indicates the outside business pertained to e-commerce and digital real estate, and that in 2021, PFSI became aware of the outside business. However, because PFSI did not require any of the three reps involved to provide written notice of the outside business to the firm, it violated its own supervisory rules, and furthermore remained in the dark about one or more aspects of the outside business.
When a broker fails to disclose their outside business activity to their firm, two negative consequences result. First, the broker's activity falls outside of the score of the firm's supervision potentially without any oversight, and second, the broker involved in the outside business exhibits a potentially undisclosed conflict of interest. This is especially true when the outside business activity relates to investing.
Both selling away and conflicts of interest can have devastating results for investors, as suitability supervision may not occur, or the broker may unsuitably recommend investing in the outside business, which can be perilous not just if the business performs poorly, but also because it may result in excessive sales charges, commissions, or fees.
If you invested with PFS Investments or with any broker or investment adviser who has solicited your investment in an undisclosed outside business, and these potentially unsuitable recommendations have 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.