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Bad Broker

Donovan Thomas Kelly Suspended for Selling Away and False Compliance Attestations

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Citation

According to FINRA, Donovan Thomas Kelly was fined $10,000 and suspended for seven months on March 16, 2022, for participating in private securities transactions without providing prior written notice to his member firm.

Kelly recommended that investors purchase promissory notes in an oil and gas drilling company, summarized the investment for investors, and arranged for some investors to fund purchases through sales and money transfers from their firm accounts. Collectively, these investors, including himself and other firm customers, invested $688,000 in the company. Kelly did not receive compensation for the investments.

When asked on annual firm attestation forms whether he had participated in private securities transactions, Kelly answered no, despite his active role in promoting and facilitating these investments.

Private securities transactions conducted outside firm supervision, known as selling away

Violation :

Tags :

deprive investors of important protections. Firms cannot assess suitability, conduct due diligence on offerings, or monitor for fraud when representatives facilitate investments without firm knowledge. Oil and gas drilling investments are often high-risk, speculative investments that may not be suitable for many investors, particularly when structured as promissory notes from companies with uncertain cash flows. The fact that Kelly arranged for customers to liquidate firm account holdings to fund these investments raises additional suitability concerns. Kelly's false answers on annual compliance attestations compounded the violation by actively concealing his selling away activities from his firm. These attestations exist precisely to identify situations where representatives are engaging in outside securities activities requiring firm supervision. This case demonstrates that selling away violations occur even without compensation. The harm to investors comes from lack of firm supervision, not from whether the representative receives payment. Investors should be cautious about any investment opportunities presented outside their normal account relationship and should verify that all investments receive proper firm review and approval.,
Donovan Thomas Kelly,
10000
CRD Number : 2022-03-16

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