← Broker database 2023-05-22
Lizbeth Saavedra Suspended for Private Securities Transaction and Undisclosed Outside Business Activities
According to FINRA, Lizbeth Saavedra was suspended for 60 days in all capacities for participating in a private securities transaction and engaging in outside business activities without providing required notice to her member firm. No monetary sanction was imposed in light of Saavedra's financial status.
Saavedra entered into a merchant cash advance agreement with a company, receiving monthly payments of $800 in return for her $8,000 investment. This investment constituted a security, and because Saavedra did not make the investment through her firm and did not provide written notice before signing the agreement, she participated in an unapproved private securities transaction. She also falsely attested on the firm's annual compliance questionnaire that she had not participated in any unapproved private securities transactions.
Additionally, Saavedra engaged in two undisclosed outside business activities. She worked as an administrative assistant for representatives of, and later directly for, the merchant cash advance company, earning approximately $30,000 in compensation. She did not disclose this work to her firm until over six months after starting. Saavedra also created and registered a limited liability company, filed a corporate amendment naming herself as manager, and opened a business bank account in its name, but never disclosed the LLC to the firm. She also falsely attested on an annual compliance questionnaire that she had not engaged in undisclosed outside business activities.
FINRA rules require registered representatives to provide written notice to their firms before participating in private securities transactions and before engaging in outside business activities. These requirements enable firms to supervise representatives' activities, identify potential conflicts of interest, and ensure compliance with securities laws.
This case demonstrates the importance of disclosure and firm approval for activities outside a representative's employment with their member firm. Even activities that seem unrelated to securities, like working for a merchant cash advance company, must be disclosed to enable proper supervision.