Stoltmann Law Offices, a Chicago-based securities and investor rights law firm continues to investigate claims by investors who were sold investments in the fraudulent note scheme Future Income Payments. Investors have rights and if you were solicited to invest in Future Income Payments by your financial advisor, you may have a claim to pursue for negligence or fraud. According to an article that appeared on ThinkAdvisor, former SagePoint financial advisor Troy Baily solicited several clients to invest in securities offered by Future Income Payments (“FIP”). FIP turned out to be a multi-million dollar pension scam with investors losing everything. According to the article, Baily submitted to what is called an “Acceptance, Waiver, and Consent” with the Financial Industry Regulatory Authority as a result of these ill-fated solicitations.
An AWC is essentially the formal settlement of a regulatory investigation conducted by FINRA of a licensed financial advisor. In this instance, Baily accepted FINRA’s conclusion that he solicited four SagePoint clients to invest a total of $210,000 in securities offered by Future Income Payments. In so doing, he violated FINRA Rule 3280 and FINRA Rule 2010. As punishment for his violations, Baily accepted a six-month suspension and a fine in the amount of $5,000. Although an AWC is technically not an admission of fault or guilt, the facts alleged by FINRA are clear and do not require interpretation – Baily sold FIP investments to his SagePoint clients.
The best bet for victims, especially those who were Baily’s clients, is to pursue his broker-dealer, SagePoint through FINRA Arbitration. As we have said in the past, brokerage firms are ultimately responsible and liable for the misconduct of their agents. Here, there are two separate routes investors can take to recover against SagePoint. The first is through the legal theory of apparent agency, or Respondeat Superior. This is an age-old legal concept that the principal is responsible for the conduct of its agent, so long as the conduct is performed in the course and scope of that agency relationship. Here, Baily sold securities, provided investment and financial advice, to clients to invest money in FIP. That is clearly within the scope of his agency relationship with SagePoint.
The second route is a claim for direct liability against SagePoint for negligent supervision pursuant to FINRA Rule 3110. This basic responsibility is a foundational part of the securities regulatory scheme. Under Section 15(b) of the Securities Exchange Act of 1934, “[t]he Commission, by order, shall censure, place limitations on . . ., suspend . . . or revoke the registration of any broker or dealer if it finds . . . that such broker or dealer . . . (E) has failed reasonably to supervise, with a view to preventing violations, another person who is subject to his supervision.” 15 U.S.C. § 78o(b)(4). “Reasonable supervision” is defined as: “Established procedures and a system for applying such procedures which would reasonably be expected to prevent and detect, insofar as practicable, any…violation of the Act by an Associated Person.” See 15 U.S.C. § 78o(b)(4)(E)(i). Supervision is the cornerstone of the securities industry and has been since the founding of the SEC.
If you or someone you know was solicited to invest in FIP through Baily or any financial advisor, you should contact Stoltmann Law Offices at 312-332-4200 for a free, no obligation consultation with a securities attorney. We offer representation nationwide to your clients on a contingency fee basis which means we do not get paid until you do.