← Broker database 2023-04-19
Johnathan Norton Suspended 30 Days for Undisclosed Private Securities Transactions
According to FINRA, Johnathan Jasper Norton was suspended for 30 days for investing approximately $110,000 in private securities transactions without providing prior written notice to his member firm. No monetary sanction was imposed in light of Norton's financial status.
Norton personally invested in investment contracts offered and sold by a purported invoice factoring company that provided cash to companies in exchange for their accounts receivable. Norton made his investments by entering into separate "Funding Partner" agreements pursuant to which he provided capital funding to the company in exchange for promises that it would acquire accounts receivable solely for his account and generate 15 to 20 percent returns on his investments.
Norton did not make these investments through his firm, nor were they securities offered by his firm, and thus they were outside the regular course or scope of his employment with the firm. FINRA rules require registered representatives to provide prior written notice to their firm before participating in private securities transactions, commonly referred to as "selling away," so that firms can evaluate potential conflicts of interest and supervisory concerns.
This case, like the similar case involving Larry Eugene Norton, demonstrates that the private securities transaction rule applies even when representatives are investing their own personal funds rather than soliciting customers. The promised returns of 15 to 20 percent should have raised red flags about the investment's risk profile. Firms need to know about their representatives' participation in private investments to assess whether the investments create conflicts of interest or suggest judgment issues.
Investors should understand that registered representatives who participate in high-risk private investments may have divided loyalties or financial pressures that could affect their judgment when making recommendations.