← Broker database 2024-07-25
Seth Alan McKinney Suspended for Undisclosed Private Securities Transactions
According to FINRA, Seth Alan McKinney was assessed a deferred fine of $10,000, suspended from association with any FINRA member in all capacities for 18 months, and ordered to pay deferred disgorgement to FINRA in the amount of $13,000 plus interest on July 25, 2024, for participating in private securities transactions totaling $2 million without disclosing his participation to or seeking approval from his member firm.
McKinney formed an entity to purchase a commercial property located in Georgia. To partially fund the purchase, the entity raised $600,000 from eight investors as part of a private offering. McKinney personally invested $91,515 in the offering. Subsequently, McKinney formed another entity to purchase a commercial property in Illinois. To partially fund the purchase, this entity raised $1.4 million from 12 investors as part of a private offering. McKinney personally invested $91,000 in this offering.
In addition to investing his own funds in the offerings, McKinney, along with his business partner, participated in these securities transactions by soliciting all investments, drafting marketing materials, and executing subscription agreements on behalf of the entities. The entities charged a one-percent management fee on the invested funds, and McKinney received 65 percent of that fee, totaling $13,000.
FINRA Rule 3280 requires registered representatives to provide prior written notice to their member firm before participating in any private securities transaction and to receive approval from the firm. This rule exists to allow firms to supervise such transactions and evaluate whether they are appropriate and whether they create conflicts of interest. When representatives engage in private securities transactions without providing notice to their firm, investors may not have the protections that would normally be provided through firm supervision.
The 18-month suspension, in effect from August 5, 2024, through February 4, 2026, and the disgorgement of $13,000, reflect the seriousness of engaging in substantial undisclosed private securities transactions.