Stoltmann Law Offices is a Chicago-based securities and investment fraud law firm that offers representation to investors nationwide on a contingency fee basis. We are currently investigating “selling away” claims involving Merrill Lynch and a financial advisor from their San Francisco office, Richard Hogan. The most important take-away from this post is to understand it does not matter that Merrill Lynch calls it, if the misconduct involved investments and clients, Merrill Lynch is responsible for the conduct of its agent – full stop. “Selling away” is a securities industry moniker used to deflect responsibility for unapproved investment recommendation by rogue brokers. The law makes it clear that the firm, Merrill Lynch, has an obligation to supervise their broker’s conduct and the law also allows for investors to make agency-based claims agains Merrill Lynch too.
According to a recent filing by the Financial Industry Regulatory Authority (FINRA), Richard A. Hogan conceded to a twelve month ban and a $10,000 fine as a result of an investigation by the regulator into alleged misconduct committed by Mr. Hogan. According to FINRA, Hogan participated in “private securities transactions” involving three Merrill Lynch clients and about $630,000 in Asia-based funds. the funds were a Hong Kong based equity fund and a Vietnam based equity fund. FINRA further stated that Mr. Hogan misrepresented to Merrill Lynch what his involvement was in these funds, which Merrill Lynch apparently did not offer on their platform. Once Merrill Lynch found out otherwise, in July 2020, Merrill Lynch fired him.
“Private Securities Transaction” is more securities industry code for investments made or solicited by brokers “outside” of the firm with whom they are registered. Brokers like Hogan have an obligation under FINRA Rule 3280 to disclose transactions of this nature and receive approval from the firm, before participating in it. According to FINRA, Hogan never disclosed that he recommended these Asia-Fund investments to firm clients, which was something he was required to disclose. Hogan then became a very easy mark for FINRA to exercise its police power over registered brokers, suspend, and fine him.