According to FINRA, Scott Michael Bremus was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for six months for participating in a private securities transaction without providing prior written notice to or obtaining written approval from his member firm. The transaction involved two of his firm customers, a married couple, who invested $300,000 in a promissory note with a company as a result of Bremus's facilitation.

Bremus introduced the married couple to another registered representative who was also registered with FINRA through the same firm. That representative engaged in outside business activities that he did not disclose to the firm and caused firm clients to transfer money from their firm accounts to those undisclosed businesses, including the company in which the married couple invested. With the customers' authorization, Bremus electronically signed and submitted firm money transfer forms to request a $125,000 wire and a $175,000 wire from the customers' accounts to the company. Significantly, on these forms, Bremus attested that he "did not solicit, recommend, or otherwise participate in the underlying transaction or investment for which this transfer was requested."

This attestation proved to be false, as Bremus thereafter communicated with the other representative regarding the status of the customers' investment in the company. His involvement in facilitating the investment and his subsequent communications about it demonstrated that he did participate in the transaction, contrary to his attestation. The private securities transactions rules, often called "selling away" rules, require representatives to provide written notice to their firms before participating in securities transactions outside the regular course of their employment, regardless of whether they receive compensation. These rules exist to ensure firms can supervise such activities and protect customers.

Even though Bremus did not receive selling compensation for the transaction, his facilitation of the investment and his communications about it constituted participation that required disclosure and approval. The fact that the other representative involved was engaged in undisclosed outside business activities that led to customers transferring money out of their firm accounts highlights the risks of private securities transactions. When such transactions occur outside firm supervision, customers lose important protections and may be steered toward problematic investments. For investors, this case illustrates the dangers of transferring money out of brokerage accounts to invest in opportunities brought by financial professionals, even when those professionals claim they are not directly involved. If a financial advisor facilitates an investment outside of their firm, it should raise red flags. Investors should ask detailed questions about any such investments and consider seeking independent advice before proceeding.