Financial Industry Regulatory Authority is an industry body that is responsible for setting forth and enforcing rules designed to protect investors and market integrity. The purview of FINRA also includes the regulation of certain securities transactions between brokers and brokerages and the general public.
As an agency overseen by the Securities and Exchange Commission (SEC), the FINRA Hearing panel is authorized to hear alleged violations of FINRA rules, SEC rules, or federal law. The FINRA hearing process can result in financial brokers, fiduciaries, and other covered parties facing discipline including fines and being barred from engaging in financial transactions in the industry.
The FINRA Hearing Panel issued a decision in a recently heard matter regarding the failure to report certain securities transactions in Department of Enforcement v. Jim Jinkook Seol (No. 2014039839101).
Unreported Covered Securities Can Trigger a FINRA Enforcement Action in Maryland
In 2011, while still affiliated with his brokerage firm, Jim Seol formed Western Regional Center Incorporated (WRCI)in order to pursue opportunities in the EB-5 investment visa business. The EB-5 is a type of visa where wealthy foreign entrepreneurs can invest either $500,000 or $1 million dollars in to a U.S. commercial venture to obtain a green card. If their investment meets certain job creation metrics, the EB-5 investor and qualifying family members can obtain a pathway to U.S. citizenship. With some exceptions EB-5 investors, regional centers, and project owners are bound by U.S. securities laws.
Through WWRCI, Seol identified a potential EB-5 project site in California. Seol then traveled to South Korea and China to pitch this potential EB-5 investment. These activities were apparently successful and by 2013, during the height of the EB-5 boom, the offering was fully invested raising approximately $100 million. WRCI earned an annual $736,000 management fee.
However, Seol did not report his securities activities to his employing firm.
FINRA Hearing Panel Finds Undisclosed Outside Transactions, Misrepresentations in Compliance Questionnaires
The hearing panel did not find Seol’s claims credible that he did not believe that the EB-5 transactions in question were securities. The panel concluded that the transactions included securities and found Seol’s conduct “egregious” because he had previously described the EB-5 limited partnership interests as securities to a business partner. The panel found that Seol participated in private securities transactions, engaged in undisclosed outside business activities, and for made misrepresentations to his employer in compliance questionnaires. The panel found Seol violated FINRA Rules 3270, 3040, and 2010.
Due to the violations and their egregious nature, Seol was barred from associating with any member firm in any capacity for participating in private securities transactions and engaging in outside business activities without prior written notice to his member firm employer.
Work with Experienced Maryland FINRA Attorneys
Financial professionals who face FINRA proceedings often face serious consequences that can place their livelihood in jeopardy. The lawyers of the Heyman Law Firm can proved strategic, on-point guidance to brokers and fiduciaries. To schedule a confidential consultation, please call our law office at 443-6878802 today.