According to FINRA, Aaron Douglas Maurer was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for two years for engaging in unapproved private securities transactions by soliciting investors to purchase securities issued by a company of which he was a 25 percent owner and board member.
Maurer raised a total of $1,100,000 through securities transactions in which he solicited and sold membership units, which were equity interests, in the company to investors. Some of these investors were customers of his member firm. The substantial amount raised demonstrates this was not a small side activity but rather a significant selling effort conducted entirely outside his firm's knowledge and supervision.
Maurer had certified that he reviewed and understood his firm's written supervisory procedures, which prohibited representatives from engaging in private securities transactions whether or not there was compensation paid for effecting the transaction. The firm required all selling activities to be conducted through it. Despite this clear prohibition and Maurer's acknowledgment of understanding it, he proceeded to solicit and sell securities in his company.
Although Maurer disclosed his ownership interest in the company and role as a board member to the firm in an onboarding questionnaire related to his activities, he identified the company as a non-investment-related outside business activity. This characterization was misleading because he was actively raising capital by selling securities in the company. By mischaracterizing the nature of the activity, Maurer prevented the firm from understanding that he was engaged in securities sales.
Maurer did not provide written notice or receive approval from the firm for his participation in the transactions before beginning to solicit and sell investments in the company. The firm had no opportunity to conduct due diligence on the offering, review offering materials, assess suitability for customers, or supervise the sales process.
The conflict of interest in this case is particularly acute. Maurer was not just selling securities in any company—he was selling equity in a company he owned 25 percent of and served on the board of directors. He had a direct financial incentive to raise as much capital as possible and likely stood to personally benefit from the investments. This conflict should have been disclosed to his firm and to investors.
The two-year suspension is one of the longest suspensions (short of a bar) imposed in these disciplinary actions, reflecting the substantial amount of money raised ($1,100,000), the direct conflict of interest, the mischaracterization of the activity as non-investment-related, and the clear violation of firm procedures that Maurer had acknowledged understanding.
Investors should never invest in securities sold by a registered representative outside the representative's firm unless they first verify the firm has approved the transaction. This case demonstrates why—the representative had undisclosed conflicts and the firm had no opportunity to assess the investment.
