According to FINRA, Murray Todd Petersen was barred from association with any FINRA member in all capacities for engaging in an unapproved outside business activity selling jewelry for investment purposes and participating in undisclosed private securities transactions involving jewelry investments.
Petersen's firm initially approved an outside business activity allowing him to sell jewelry. However, the firm later withdrew its approval. Despite the withdrawal of approval, Petersen continued selling jewelry and receiving commissions, earning approximately $115,900 in jewelry sales commissions after the firm had specifically prohibited the activity.
The violations became more serious when Petersen participated in undisclosed private securities transactions while associated with a different firm. He introduced two customers to an investment offered by the jewelry company and helped facilitate their investments. Each investor signed a contract stating the investment would fund the manufacture of diamond jewelry for sale to retail stores in China and other Asian markets, with the jewelry company handling sales and making periodic payments to investors for one year. The investors were also entitled to a percentage of profits from jewelry sales.
Unfortunately, the investment went badly for the customers. They received only a portion of the promised payments, received no distribution of profits from jewelry sales, and never received repayment of their principal investments. Despite facilitating these transactions, Petersen never provided written notice to his firm and never obtained written permission for his participation. The transactions occurred outside the scope of his employment with the firm.
Adding to the misconduct, Petersen provided false information on annual compliance questionnaires by stating he had not engaged in any private securities transactions when he had facilitated these jewelry investments.
This case illustrates the dangers of investment schemes involving tangible assets like jewelry, particularly when marketed as securities offering profit participation. The promise that investors would receive both periodic payments and profit distributions made these arrangements investment contracts and therefore securities under federal law. By facilitating these transactions without firm approval, Petersen deprived customers of firm supervision and due diligence that might have revealed problems with the jewelry company.
Investors should be extremely cautious about investments in jewelry, gems, precious metals, or other tangible goods, particularly when sold through registered representatives. These investments often carry high markups, lack liquidity, and present significant fraud risks. Any investment offering involving a registered representative should be conducted through the firm with proper disclosure and supervision.
