According to FINRA, Sean C. Gordon was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for engaging in an outside business activity without providing prior written notice to his member firm.
Gordon operated an insurance business wherein he serviced insurance policies on behalf of his customers and received compensation of approximately $33,000 from the business. Gordon also applied for and received a loan in connection with his insurance business. Gordon did not provide notice to the firm, written or otherwise, of his involvement in his outside business activity when he associated with the firm. Gordon later notified his manager that he was operating an insurance business, and the firm told him that he was not allowed to do so. Nonetheless, Gordon continued to operate his insurance business, including collecting compensation, until the firm terminated his employment.
The suspension was in effect from December 5, 2022, through February 4, 2023.
FINRA rules require registered representatives to provide written notice to their member firm before engaging in any outside business activity. This requirement allows firms to supervise these activities and assess whether they create conflicts of interest, consume excessive time, or otherwise interfere with the representative's duties to the firm and its customers.
Gordon's conduct was particularly problematic because he not only failed to provide prior written notice of his insurance business when he joined the firm, but he also continued operating the business after the firm explicitly told him he was not allowed to do so. This direct defiance of the firm's instruction demonstrates a lack of respect for the firm's supervisory authority and compliance requirements.
The fact that Gordon earned approximately $33,000 from the insurance business suggests it was not a minor side activity but rather a substantial business that likely required significant time and attention. When representatives divide their attention between their securities business and an outside business, it can result in decreased attention to customers' securities accounts and needs.
Insurance products, particularly when sold in conjunction with securities products, can create conflicts of interest. For example, a representative might recommend that a customer purchase an insurance product through the outside business rather than a securities product through the firm, not because it is best for the customer, but because the representative earns more compensation from the insurance sale. When the firm is unaware of the outside business, it cannot supervise for such conflicts.
For investors, this case illustrates the importance of knowing whether your financial advisor has outside business activities. Ask your advisor directly: Do you have any business activities outside this firm? Have you disclosed them to the firm? Such questions can help you identify potential conflicts of interest. If your advisor operates an insurance business or other outside activity, consider whether their recommendations might be influenced by the desire to generate revenue from those activities rather than by your best interests.
The two-month suspension and $5,000 fine reflect the seriousness of Gordon's conduct, particularly his continuation of the business after being told he could not do so. The permanent termination of his employment by the firm demonstrates that the firm took the violation seriously and acted to protect its customers.
