According to FINRA’s findings of fact as enumerated in the AWC, “On February 25, 2015, Rideaux voluntarily terminated his employment with Morgan Stanley…” Thereafter, in August 2016, Mr. Rideaux became registered as a general securities representative with NMS Capital. Based on information set forth in the AWC, as well as Mr. Rideaux’s BrokerCheck report, his departure from Morgan Stanley is allegedly due to his “potential participation in securities activity away from Morgan Stanley….”
In light of Mr. Rideaux’s voluntary departure from Morgan Stanley, and FINRA Enforcement’s follow-up investigation in February 2018 concerning alleged activity away from his then employer, it appears that Mr. Rideaux may have engaged in an impermissible activity known as “selling away.” Selling away occurs when a broker or financial advisor sells an investment to a client that is not included in the client’s account or among the investment products offered by the firm. Selling away is often associated with a broker’s other (“outside”) business activities. Such private securities typically include investments in private placements, closely-held private companies, limited partnerships, certain real estate investments, as well as promissory notes. If the broker fails to notify the firm, in the first instance, or proceeds with an unauthorized transaction in derogation of the firm’s order, then selling away has occurred, in direct violation of FINRA Rule 3280 and NASD Rule 3040.
Brokerage firms like Morgan Stanley and NMS Capital have a duty to ensure that their registered representatives are adequately supervised. In this regard, brokerage firms must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.
Publicly available information through BrokerCheck indicates that Mr. Rideaux has been named in two pending customer complaints, both of which appear to involve allegations of selling away, as follows:
- 03/29/2016 – Claimant alleged that FA solicited “investment opportunities that were unauthorized by the firm…”;
- 06/08/2017 – Damages requested in the amount of $10,000,000 in connection with allegations of misrepresentation of a non-firm product.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including selling away, in addition to claims against brokerage firms for their failure to supervise. Investors may contact a securities arbitration attorney at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.