Cold-calling brokers unknowingly dialed securities regulators: Officials

Unlicensed reps hawked investments to Missouri agent registration specialist and an investigator, state claims: ‘money in the bank'

Dec 23, 2010 @ 1:31 pm

By Bruce Kelly

Talk about your wrong numbers.

Apparently, cold-calling stockbrokers have been busy dialing, of all people, securities regulators in the Show Me state.

In the past two months, securities regulators in Missouri have filed cease-and-desist orders against brokers from one of the most prominent independent broker-dealers in the industry, Financial Network Investment Corp., after brokers called Missouri Securities Division staff while at work. The state also filed a similar motion against brokers from Meyers Associates LP of New York.

Missouri filed cease-and-desist orders against the firms as well.

Once a hallmark of the freewheeling stock market of the 1990s, cold calling is a practice the securities industry publicly frowns upon. The National Do Not Call Registry also has put a dent in the once-common prospecting technique.

But cold calling remains a staple of some brokers' and firms' business.

According to the November action against FNIC, one broker pitched the Nuveen Multi-Strategy Income and Growth Fund 2 to a registration specialist and an investigator, telling them “they could expect a 20% to 25% return during that six- to eight-month period.” Broker Derek Robertson, who is not registered to sell securities in Missouri, “characterized this as a ‘realistic' and ‘very conservative' estimate,” according to the order.

And this month, a broker from Meyers Associates called the same office, spoke with a registration specialist and pitched shares of Nuance Communications Inc., discussing the stock's potential to rise to $28 or $29 per share, based on the belief that it will be acquired by Apple Inc. During a Dec. 8 call, the broker, Sukhwan Michael Yun, “continued to pressure [the regulator] to make an immediate purchase, asking, ‘Why don't we do this?'” according to the Missouri order.

In a later call, Mr. Yun, who is also not registered to sell securities in the state, said Nuance Communications is “the ‘Bentley' of stocks, would be ‘money in the bank,' and an investment in [the stock] was ‘safe money,'” according to the Missouri action.

The Missouri Securities Division made similar allegations against both FNIC and Meyers Associates, including violations of transacting business as an unregistered agent, employing an unregistered agent and multiple violations of omitting to state material facts in connection with the offer or sale of a security. The action against Meyers Associates also alleges making untrue statements in connection to an offer or sale of a security.

FNIC is a leading independent broker-dealer, with over 2,000 reps and advisers and close to $300 million in annual gross revenue.

“Financial Network strives to comply with all state and federal regulatory requirements,” a spokeswoman, Carol Graumann, wrote in an e-mail. “We regret the circumstances that led the state of Missouri to file this action and are cooperating with the state to reach a quick conclusion. The firm will have no further comment on the specifics of this matter.”

Meyers Associates has about 100 advisers, according to the Missouri action. Bruce Meyers, its managing partner, did not immediately return phone calls requesting a comment.


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