According to FINRA, Mark Giordano was fined $5,000 and suspended for two months on January 31, 2022, for engaging in compensated outside business activities without providing required prior written notice to his member firm.

Giordano served as part owner and vice president of a company involved in horse racing and breeding, and as part owner of another company involved in horse racing. Additionally, he served as part owner and vice president of a real estate rental company, owned a real estate-flipping company, and engaged in a house-flipping venture to purchase, renovate, and sell residential properties.

Firm customers were involved in all but one of these outside business activities, and the activities were outside the scope of Giordano's relationship with his firm. Giordano never disclosed one of these ventures to the firm and did not timely disclose the others.

FINRA rules require registered representatives to provide prior written notice of outside business activities so firms can supervise these activities, identify potential conflicts of interest, and ensure representatives are devoting adequate attention to their securities business and customers. When representatives fail to disclose outside activities, firms cannot provide proper supervision or evaluate whether conflicts exist.

The involvement of firm customers in most of these outside business activities is particularly concerning. When representatives engage in business ventures with their securities customers, significant conflicts of interest can arise. For example, representatives might prioritize the success of the outside business over their customers' best interests in securities recommendations, or might use their position of trust as a financial advisor to solicit customer participation in business ventures that may not be suitable.

Giordano's multiple outside businesses - involving horse racing, breeding, real estate rentals, and house-flipping - represented substantial activities beyond his securities business. Such extensive outside activities raise questions about whether representatives are devoting sufficient time and attention to their securities customers.

The real estate ventures merit particular attention. House-flipping - buying, renovating, and quickly selling properties for profit - involves significant risks and requires substantial time commitment. Real estate rental businesses also demand ongoing attention for property management, tenant relations, and maintenance. When representatives are heavily involved in such businesses, their securities customers may not receive adequate service.

For investors, this case illustrates the importance of understanding your financial advisor's outside business activities. Advisors with extensive outside businesses may have divided attention and conflicts of interest. Ask your advisor about any outside business activities and consider whether these activities might affect the advice and service you receive.