According to FINRA, Archie Abel Blood Jr. was fined $5,000 and suspended for four months after participating in private securities transactions without providing prior written notice to his member firm.

Blood facilitated the sale of $400,000 of securities to two married couples who were customers of his firm, but failed to notify the firm beforehand. He introduced the customers to an individual associated with a potential investment in a company that the firm had not approved for sale. The Unit Purchase Agreements identified the investment interests as unregistered securities. Blood actively participated in both investments—sending one customer the purchase agreement, confirming they would invest $200,000, and ensuring funds were wired to complete the investment. For the other customers, he provided their information and a non-disclosure agreement they executed that was necessary to complete their $200,000 investment.

These transactions occurred outside the regular course and scope of Blood's employment with his firm. Compounding the violation, Blood falsely attested to his firm that he did not assist, advise, or facilitate any private securities transactions, demonstrating a lack of honesty about his conduct.

FINRA Rule 3280 requires registered persons to provide prior written notice to their firm before participating in any private securities transaction. This rule exists to protect investors by ensuring firms can supervise all securities activities by their representatives. When representatives "sell away"—conducting securities transactions outside firm supervision—customers lose important protections. They may incorrectly believe the firm has vetted the investment, that the firm will supervise the transaction, and that they can seek recourse from the firm if problems arise.

Private securities transactions often involve high-risk, unregistered securities that lack the disclosure and regulatory protections of registered offerings. The fact that Blood introduced customers to an unapproved investment and facilitated $400,000 in purchases without firm knowledge or supervision exemplifies why the rule exists.

For investors, this case illustrates the importance of ensuring your representative's firm is aware of and supervising all investment recommendations. If a representative suggests an investment and asks you to invest directly or outside normal account procedures, it may be a red flag for selling away. Investors should verify through their firm that any investment recommendation is approved and supervised. The four-month suspension imposed on Blood, while allowing him to eventually return to the industry, serves as a reminder that private securities transactions without firm notification are serious violations that deprive investors of important protections.