Stoltmann Law Offices is investigating Walter Rae Chao, a former investment advisor with LPL Financial. Chao recently entered into a Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA) in which he was fined $30,000 and suspended from association with any FINRA member in any capacity for two years. Chao allegedly participated in private securities transactions totaling $1.27 million without his member firm’s approval. This is commonly referred to as “selling away” and is when a broker recommends a security that is not held or offered by his member firm in order to garner commissions for himself. Chao recommended his investors put money into a firm that had created special purpose vehicles (SPV) to purchase pre-initial public offering (IPO) shares of Facebook, Inc. The investors could then invest in purchase ownership interests in the SPVs. The firm selling the SVPs waived $8,000 in fees associated with Chao’s sales. Chao also allegedly used an unapproved email address for communications related to his transactions with the selling firm. He also provided false and misleading statements to his member firm regarding the sale of the SVPs. During this time, Chao was a branch manager at this firm, and FINRA found that he failed to adequately supervise his staff. They were found to have used blank signed forms and unapproved email addresses.
Walter Rae Chao was registered with NYLife Securities in San Mateo, California from July 2003 until September 2007, LPL Financial in San Mateo from August 2007 until September 2012 and Purshe Kaplan Sterling Investments in San Mateo from October 2012 until January 2015. Pursuant to FINRA rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, LPL may be liable for investment losses you or someone you know suffered with Walter Rae Chao. LPL can be sued in the FINRA arbitration process for theses losses.