According to FINRA, Ryan Wesley Davis was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a FINRA investigation.
FINRA's investigation stemmed from amended Forms U5 filed by Davis's former member firm. The firm filed an amended Form U5 disclosing that it had initiated an internal review of Davis's potential involvement in a private securities transaction. The firm subsequently filed an additional amended Form U5 disclosing that Davis was subject to an investment-related, customer-initiated civil litigation.
Private securities transactions, commonly referred to as "selling away," occur when registered representatives engage in securities transactions outside the regular course of their employment with their member firm. FINRA Rule 3280 requires representatives to provide prior written notice to their firms before participating in any private securities transaction. This notice requirement serves important protective functions: it allows firms to supervise these outside activities, assess potential conflicts of interest, evaluate whether the investments are appropriate for the representative to recommend, and ensure adequate disclosures are made to customers.
The filing of amended Forms U5 indicating both an internal review into potential selling away and customer litigation strongly suggests that Davis may have recommended or facilitated an investment outside his firm that resulted in customer losses and legal claims. However, FINRA's ability to investigate these matters was blocked when Davis refused to testify.
When FINRA requests on-the-record testimony, it is similar to a legal deposition. The individual appears, is placed under oath, and answers questions from FINRA staff while a court reporter transcribes the testimony. This testimony is essential for FINRA to gather facts, assess witness credibility, and determine whether rule violations occurred and what sanctions may be appropriate.
All persons associated with FINRA member firms have an absolute obligation to cooperate with regulatory investigations and requests. This includes appearing for testimony when requested. Davis's refusal to testify directly obstructed FINRA's investigation and prevented the regulator from determining what actually occurred with regard to the potential private securities transaction and related customer harm.
The bar imposed on Davis is the most severe sanction available and effectively ends his securities industry career. While technically a barred individual can apply for re-entry after two years, such applications are rarely granted, especially when the bar was imposed for failure to cooperate with an investigation.
For investors, this case illustrates the importance of verifying that any investment recommendation comes through an investment professional's registered firm. Investments offered "off the books" carry heightened risks and may lack regulatory protections.
