FINRA Sanctions Advisor for Unapproved Fundraising Activities Following Approved OBA

Posted on March 28th, 2024 at 1:07 PM
FINRA Sanctions Advisor for Unapproved Fundraising Activities Following Approved OBA

From the desk of James Eccleston at Eccleston Law

The Financial Industry Regulatory Authority (FINRA) has levied a $15,000 fine and a 21-month suspension against a former advisor, Jeffrey W. Davidson, based in Austin, Texas. Davidson engaged in fundraising activities that raised over $10 million for a fitness company owned by him and his wife.

Although Davidson had approval from his former firm, Equitable Advisors, for his ownership in the fitness company, he lacked authorization for the fundraising efforts, according to FINRA. AdvisorHub reports that between 2021 and 2022, Davidson and his wife earned $2.4 million by selling a portion of their equity in the company, as per FINRA.

This action by Davidson contravened FINRA's rule against unapproved private securities transactions and its overarching Rule 2010, which mandates high standards of conduct.

AdvisorHub reports that the AWC (Acceptance, Waiver and Consent) underscores the common challenge of outside business activities for advisors and their firms, necessitating robust supervision to identify potential customer conflicts. This especially is true in any evolution towards fundraising or changes in business nature, which may trigger the need for separate approvals, as demonstrated in this FINRA settlement.

 Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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