← Broker database 2022-12-19
John Matson Barred for Refusing to Cooperate with Investigation into Promissory Notes
According to FINRA, John Nicholas Matson was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation into a customer's investments in promissory notes recommended by him.
The matter originated from an 80-year-old customer's call to the FINRA Securities Helpline for Seniors in which the customer advised that Matson had recommended the customer invest in a promissory note and had thereafter ceased making promised interest payments on the note. Matson refused to provide documents and information requested by FINRA in connection with the investigation.
Promissory notes are debt instruments where the issuer promises to pay the investor principal and interest according to specified terms. While legitimate promissory notes exist, they are also commonly used in investment frauds, particularly when sold to seniors. The fact that an 80-year-old customer reached out to FINRA's Securities Helpline for Seniors indicates significant concern about the investment and the cessation of interest payments.
When interest payments stop on a promissory note, it often signals financial distress of the issuer or, in worst-case scenarios, a fraudulent scheme. FINRA's investigation would have sought to understand the nature of the promissory notes, whether they were suitable investments for the senior customer, whether proper disclosures were made, and what happened to cause the interest payments to stop.
Matson's refusal to provide documents and information prevented FINRA from fully investigating these important questions. His refusal suggests an unwillingness to explain his recommendations or account for what happened with the customer's investment. This lack of cooperation resulted in his permanent bar from the securities industry.
For investors, particularly seniors, this case offers several important lessons. First, be extremely cautious about promissory note investments, especially when they are not issued by established, well-known entities. These investments are often illiquid, risky, and sometimes fraudulent. Second, FINRA's Securities Helpline for Seniors (844-574-3577) is a valuable resource for older investors who have concerns about their investments or brokers. Third, when a broker refuses to cooperate with a regulatory investigation, it typically indicates serious problems and results in a bar from the industry.
Always ask detailed questions about any promissory note investment, including: Who is the issuer? How will they use the funds? What is their financial condition? What are the specific terms of repayment? What happens if they cannot pay? Are there any guarantees or collateral? Is the note registered with the SEC or is there a valid exemption from registration?