Initiated By
FINRA
Allegations
FINRA RULE 2010, NASD RULES 1031, 2110, 2210(D)(1)(A), 2210(D)(1)(B), 2310, 3040:
ON JUNE 9, 2008, WHILE REGISTERED WITH HIS MEMBER FIRM, FREEMAN ENTERED INTO A WRITTEN CONTRACT WITH A COMPANY TO SELL NOTE AGREEMENTS. FREEMAN DID NOT PROVIDE NOTICE TO HIS FIRM, NOR DID HE RECEIVE PERMISSION FROM HIS FIRM, TO ENGAGE IN ANY ACTIVITIES RELATED TO THE COMPANY.
FREEMAN DISTRIBUTED THE COMPANY'S SALES LITERATURE AND SOLD THE COMPANY'S PRODUCTS TO 14 CLIENTS FROM JUNE 2008 THROUGH JANUARY 2009. FREEMAN SOLD THE COMPANY'S NOTE AGREEMENTS TO THESE CUSTOMERS AWAY FROM HIS FIRM, LACKING THE PROPER LICENSE, A SERIES 7, TO SELL THESE SECURITIES.
FREEMAN'S CUSTOMERS INVESTED IN THE COMPANY'S NOTE AGREEMENTS SOLELY BASED UPON FREEMAN'S RECOMMENDATION. FREEMAN REPRESENTED THAT THE COMPANY'S PRODUCTS WERE SAFE AND THE NOTES GUARANTEED A HIGH RETURN WITHIN FIVE YEARS. FREEMAN, HOWEVER, LACKED ANY FACTUAL BASIS TO MAKE THESE CLAIMS - FREEMAN DID NOT HAVE ANY EXPERIENCE WITH THE COMPANY'S PRODUCTS AND FAILED TO CONDUCT ADEQUATE DUE DILIGENCE. FREEMAN HAD NOT BEEN INTRODUCED TO THE COMPANY UNTIL 2008 AND HAD NEVER BEFORE SOLD A PROMISSORY NOTE PURPORTEDLY FUNDED BY LIFE SETTLEMENTS. YET, WITHOUT ANY REASONABLE BASIS TO DO SO, FREEMAN RECOMMENDED THE COMPANY'S NOTE AGREEMENTS TO HIS CUSTOMERS AS A SAFE INVESTMENT.
FURTHER, WHILE RECOMMENDING THE COMPANY'S INVESTMENTS TO HIS CUSTOMERS, FREEMAN PROVIDED THEM WITH THE COMPANY'S SALES LITERATURE IN THE FORM OF A TRI-FOLD BROCHURE. THE COMPANY'S BROCHURE, HOWEVER, CONTAINED SEVERAL UNWARRANTED AND MISLEADING STATEMENTS, FAILED TO DISCLOSE ANY RISKS INVOLVED IN THE INVESTMENTS, AND GUARANTEED THE PRODUCTS WOULD SUCCEED. THE STATEMENTS HELPED FORM THE BASIS OF FREEMAN'S RECOMMENDATIONS TO HIS CUSTOMERS, EVEN THOUGH FREEMAN DID NOT VERIFY THESE CLAIMS PRIOR TO RECOMMENDING AND SELLING THE NOTE AGREEMENTS TO HIS CUSTOMERS. ALTHOUGH FREEMAN DID NOT WRITE THESE STATEMENTS OR ASSIST IN THE DRAFTING OF THE SALES LITERATURE, HE SHOULD HAVE KNOWN THAT THE STATEMENTS WERE MISLEADING.
Resolution
Acceptance, Waiver & Consent(AWC)
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$10,000.00
Sanctions
Restitution
Amount
$508,185.88
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
12 MONTHS
Start Date
3/5/2012
End Date
3/4/2013
Regulator Statement
WITHOUT ADMITTING OR DENYING THE FINDINGS, FREEMAN CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $10,000, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR 12 MONTHS, AND ORDERED TO PAY $508,185.88 IN RESTITUTION, AS ORDERED IN FREEMAN'S AGREEMENT WITH A STATE REGULATORY AGENCY. THE FINE SHALL BE DUE AND PAYABLE EITHER IMMEDIATELY UPON REASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION, OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDINGS, WHICHEVER IS EARLIER. FREEMAN SHALL PAY FULL RESTITUTION WITHIN 90 DAYS OF THE ISSUANCE OF THIS AWC AND SHALL MAKE ALL RESTITUTION PAYMENT TO THE COURT-APPOINTED RECEIVER. FREEMAN MUST PROVIDE PROOF THAT ALL RESTITUTION PAYMENTS WERE PAID WITHIN 90 DAYS OF THE ISSUANCE OF THIS AWC BEFORE REASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION, OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDINGS, WHICHEVER IS EARLIER. AS OF THE EXECUTION OF THIS AWC, FREEMAN HAD PAID $55,000 OF THE RESTITUTION ORDERED. THE SUSPENSION IS IN EFFECT FROM MARCH 5, 2012, THROUGH MARCH 4, 2013. $10,000 FINE PAID.