Walter Rae Chao, a former broker with the San Mateo, California branch of LPL Financial, LLC (LPL Financial), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he participated in private securities transactions totaling $1.27 million without the required approval from LPL Financial.
FINRA found that Walter Chao, of Redwood City, California, introduced at least 13 clients to purchase interest in special purpose vehicles (SPV), which were created by another firm, in order to purchase pre-initial public offering (IPO) shares of Facebook, Inc. Nine of the 13 clients invested a total of $1.27 million in the Facebook SPVs. FINRA stated that although Mr. Chao did not receive direct compensation from the other firm for the transactions, approximately $8,000 in fees associated with Mr. Chao’s mother’s purchase of the Facebook SPV were waived.
According to FINRA, Mr. Chao had requested the approval of LPL Financial to participate in the securities transactions but was denied. Additionally, Mr. Chao allegedly tried to conceal his participation in the private securities transactions by using an unapproved email address to communicate with the investor customers and by providing false and misleading answers in an LPL compliance questionnaire by stating that he hadn’t engaged in any private securities transactions. Walter Rae Chao was assessed a deferred fine of $30,000 and suspended from association with any FINRA member in any capacity for 2 years. The suspension is in effect from August 17, 2015 through August 16, 2017.
Stockbrokers, financial advisors, and other financial industry professionals have been known to engage in many types of misconduct which violate industry rules and procedures. In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a reasonable supervisory system. The implementation of the rules requires supervisors to monitor employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker dealers and/or their supervisors fail to establish and implement these protective measures, they may be held liable to investment account holders for losses flowing from the employees’ misconduct. As a result, investors who have suffered losses stemming from unauthorized securities transactions or other misconduct by their broker or registered representative can bring forth claims to recover damages against broker dealers like LPL Financial, which have a duty to supervise its employees in order to prevent broker misconduct.
Have you suffered losses in your LPL Financial investment account due to Walter Rae Chao’s or another registered representative or stockbroker’s unauthorized securities transactions or other misconduct? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against financial professionals for unauthorized and/or fraudulent misconduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at firstname.lastname@example.org, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.