According to FINRA, Clinton F. Byrd was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for nine months for participating in a private securities transaction without providing prior written notice to his member firm. Restitution was not ordered because Byrd has compensated the beneficiaries of the customer's estate through the settlement of an arbitration claim.

Byrd caused a musical production company that he owned to issue a promissory note to the daughter of a firm customer, who signed the note on behalf of the customer's family. Through the promissory note, the company borrowed $550,000 from the customer's family. Funding for the principal amount of the note came from the customer's firm brokerage account. Pursuant to the terms of the promissory note, Byrd's company used the note to finance its acquisition of a collection of historical memorabilia.

Acting outside the scope of his employment with the firm, Byrd drafted the promissory note, which was a security, transmitted it to the customer's daughter, and both Byrd and the customer's daughter signed the note. Although the note required Byrd's company to make quarterly interest payments and repay the principal within one year, the company made no such payments.

Byrd did not provide written notice to the firm before causing his company to issue the promissory note, nor did he obtain written approval from the firm. When subsequently asked on annual firm attestation forms whether he had referred anyone to any investment opportunities outside of the firm, Byrd falsely responded that he had not.

The suspension was in effect from January 17, 2023, through October 16, 2023.

This case involves the common violation known as "selling away," where a broker engages in securities transactions outside of their firm without proper disclosure. The promissory note that Byrd's company issued was a security, and by facilitating the transaction without notifying his firm, Byrd violated important investor protection rules. When brokers engage in private securities transactions without firm knowledge, customers lose the protections that come with firm supervision and oversight.