A former longtime financial advisor who had been registered with SagePoint Financial Inc., which became Osaic Wealth Inc. last year, was barred from the securities industry this week after Osaic discharged him in December for allegedly breaking industry rules in the sale of promissory notes.
The Financial Industry Regulatory Authority Inc. Tuesday barred David Tall when he failed to cooperate in its investigation after Finra received a "regulatory tip" regarding Tall, according to the Finra settlement.
In response to a call to Tall's firm in Costa Mesa, California, a staffer said that he had retired. A spokesperson for Osaic said the firm had no comment about the matter.
According to his BrokerCheck report, Tall was fired after Osaic confirmed that "he executed two promissory notes without prior approval by the firm." It's against industry rules to sell products to customers that have not been reviewed and approved by the advisor's broker-dealer.
A 37-year veteran of the securities industry, Tall worked at SagePoint, previously AIG Financial Advisors, from 2005 through December 2023, according to BrokerCheck.
When financial advisors near the end of their careers, they may choose not to fight Finra over a compliance issue or allegation of misconduct, industry lawyers said. Legal fights can be costly and time-consuming, so some advisors may choose to walk away.
"A lawyer may tell an advisor like this, there's no upside in responding to Finra, just leave the industry," said a senior brokerage executive who asked to speak anonymously. "That's pretty standard, particularly with older advisors."
"Typically in these situations, Finra has the broker dead to rights, and rather than fighting the advisor may resign or retire, quote unquote," said Andrew Stoltmann, a plaintiff's attorney. "It’s possible the financial advisor saw the handwriting on the wall and decided to retire rather than face an uphill legal climb that could have resulted in him losing his license anyway."
Promissory notes are among the investments closely watched by securities regulators. For example, the North American Securities Administrators Association in 2019 deemed promissory notes and Ponzi schemes as the leading products or schemes that are likely to trap investors in 2020.
NASAA has said in the past that average investors should be wary of promissory note offers with a duration of nine months or less, which in some cases do not require registration. Short-term notes that seem to be exempt from securities registration have been the source of most of the frauds involving promissory notes identified by regulators.
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