← Broker database 2023-09-25
Adam Anderson Suspended for Undisclosed Outside Business Activity
According to FINRA, Adam Bruce Anderson was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for failing to provide prior written notice of an outside business activity to his firm and providing false attestations.
Anderson engaged in an outside business activity by assisting in the creation of a reinsurance company and entering into a contract as the president of that company to provide reinsurance coverage on enterprise risk management insurance policies that his separate limited liability company purchased from an insurance company. The insurance company paid Anderson's reinsurance company $197,500 in premiums. This was a tax savings arrangement for Anderson.
FINRA rules require registered representatives to provide written notice to their firms before engaging in any outside business activity. This requirement allows firms to evaluate whether the outside activity might interfere with the representative's duties to the firm or its customers, create conflicts of interest, or otherwise be inappropriate. The disclosure requirement applies even when the outside business activity does not involve securities.
Anderson compounded his violation by falsely stating on his firm annual attestation that he had disclosed all current outside business activities. When Anderson later provided written notice to the firm of his outside business activity, the firm evaluated it and did not approve it, demonstrating that the firm considered the activity problematic.
The fact that this involved a reinsurance company and a tax savings arrangement totaling $197,500 in premiums suggests this was a substantial business undertaking, not a minor side activity. Creating and operating a reinsurance company involves complex legal and financial arrangements that could potentially create conflicts with Anderson's duties to his firm and customers.
The one-month suspension and $5,000 fine reflect the seriousness of both the failure to disclose and the false attestation. This case demonstrates that registered representatives must disclose all outside business activities to their firms, regardless of whether those activities involve securities. Investors should be aware that their brokers may have outside business interests and should ask about any potential conflicts of interest.