On notice of Coburn’s violations, FINRA promptly initiated an investigation into Coburn in July 2019. According to the Acceptance, Waiver, and Consent (“AWC”) FINRA entered against Coburn, Securities America learned in January 2019 that Coburn sold unregistered securities to clients in 2010 and 2011. Securities America also discovered the Coburn settled a customer complaint relating to this scheme in 2016 without providing the required notice to his firm and FINRA. When FINRA requested documents and information from Coburn, he informed FINRA that he was no longer working in the securities industry and refused to produce the documents and information, in violation of FINRA Rule 8210. FINRA also found that Coburn violated Rule 2010, which is a “catch all” rule requiring that brokers and firms conduct business with “high standards of commercial honor” and maintain “just and equitable principles of trade”. FINRA permanently barred Coburn from the securities industries for violating these rules.
Coburn’s career in the financial services industry began in 1986 at Ameritas Investment Corp. During his thirty-three year career, he bounced from firm to firm, and landed at Securities America in January 2009. He worked from the Fort Meade, Florida branch office. Two customers have filed complaints against Coburn, including one complaint related to the real estate investment scheme. According to his BrokerCheck report, Coburn sold the client an investment in a Costa Rica real estate development, which did not make the required payments pursuant to the promissory note. The complaint for $32,000 was settled for $7,000. The entire settlement was paid by Coburn. Another client of Coburn and Securities America formally complained about an unsuitable variable annuity that Coburn sold, and the $5,000 complaint was settled for nearly $55,000, with Coburn contributing $5,000.
FINRA Rule 3280 prohibits brokers from “participating in any manner in a private securities transaction” unless the broker provides written notice to his brokerage firm and, if he will receive compensation for the transaction, receives approval from the firm. However, given the prevalence of brokers engaging in private securities schemes without approval, brokerage firms must supervise and investigate any “red flags” that indicate a broker is violating FINRA Rule 3280. Pursuant to FINRA Rule 3120, a brokerage firm must have a “Supervisory Control System” in place. Rule 3110 details several supervisory procedures that a firm must follow, including written supervisory procedures, designation and assignment of supervisors, attendance at annual compliance meetings, review of all incoming and outgoing correspondence, review and response to customer complaints, and internal inspections of branch offices. Firms should be on notice if the broker is generating a small amount in commissions, especially if he is living a lavish lifestyle beyond what he can afford based on his legitimate income from the firm. Other red flags include involvement in outside business activities, financial problems such as foreclosures, bankruptcy filings, tax liens, and gambling debt. Many red flags can often be detected through unannounced branch office inspections and supervision of e-mail and written communications. For these reasons, even if Coburn did not disclose the private real estate investment that he sold to his clients to Securities America, the firm can still be held liable for losses suffered by his clients due to negligent supervision.
For over a decade, Stoltmann Law Offices has helped victims of these “selling away” schemes recover their losses. Contact Stoltmann Law Offices for a free consultation if you invested with Bobby Wayne Coburn. We work on a contingency fee basis, so we don’t make any money unless you do!
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