According to FINRA, Evan Von Scales was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for operating an outside business activity involving marketing and selling an automated trading algorithm for the foreign exchange market without disclosing to or receiving approval from his member firm.
The findings revealed a substantial undisclosed outside business. Scales created a limited liability company for this business and actively promoted the automated trading algorithm on various social media platforms. This promotion resulted in nine individuals purchasing the algorithm for $2,000 each. While two customers later requested and received refunds, Scales still received approximately $13,000 from sales after deducting refunds and transaction fees.
The undisclosed nature of this business is particularly concerning given its connection to financial markets. Scales was marketing and selling a product designed to trade in foreign exchange markets—an activity closely related to his work in the securities industry. This created potential conflicts of interest that his firm needed to evaluate, including whether the algorithm worked as promised, whether customers were receiving suitable investment advice, whether Scales' outside business interfered with his duties to firm customers, and whether the activity created regulatory or reputational risks for the firm.
Outside business activity rules require registered representatives to disclose and receive approval for business activities conducted outside their employment with their firm. These rules exist to allow firms to supervise representatives' activities comprehensively, identify and manage conflicts of interest, ensure representatives are devoting appropriate time and attention to their firm duties, and protect firms from potential liability arising from representatives' outside activities.
The use of social media to promote the algorithm raises additional concerns. Social media communications by registered representatives are subject to securities regulations and firm supervision. By promoting the algorithm without firm knowledge or approval, Scales circumvented his firm's supervisory review of his social media communications.
To Scales' credit, he subsequently ceased operating the business. However, this voluntary cessation came only after the violations had occurred and does not erase the risks created during the period of undisclosed activity.
The three-month suspension, in effect from November 17, 2025, through February 16, 2026, along with the $5,000 fine, reflects the seriousness of operating a substantial outside business without firm disclosure and approval, particularly when the business involves financial markets.
Investors should verify that their financial professionals have disclosed all outside business activities to their firms and should be cautious about purchasing financial products or services from registered representatives outside the oversight of their firms.
