Finra charges advisor with paying under the table commissions

Finra alleges a southern California broker kicked back $900,000 in commissions to non-registered sales person.

The Financial Industry Regulatory Authority Inc. on Monday charged a southern California broker with kicking back $900,000 in commissions to a formerly Finra registered financial advisor whose clients were mostly Farsi-speaking listeners of the unregistered advisor’s television and radio shows, which were in Farsi, according to the complaint filed by Finra’s Department of Enforcement.

The broker who is the target of the complaint, Dan Beech, does not speak Farsi but the unnamed financial advisor did, Finra alleges. While not registered with Finra at the time he received commissions, the Persian speaking individual was a registered investment advisor.

Between May 2016 and at least January 2023, Beech violated industry rules when he allegedly improperly paid the commissions to the unnamed individual, who was required to be registered with Finra at the time of the payments but was not. Only sales people registered with Finra may charge and collect commissions to clients.

The unnamed, Farsi speaking RIA was involved in Beech’s practice in a variety of ways, according to Finra.

He solicited new brokerage customers, including through his Farsi language radio and television shows, and then directed to Beech for transactions, according to Finra. The unnamed person also attended Beech’s meetings and telephone calls with Beech’s brokerage customers and met independently with customers to discuss specific securities investments to be made via Beech.

“We regret that Finra enforcement staff have decided to initiate an enforcement action against Mr. Beech,” wrote Christopher Cooke, Beech’s attorney, in an email. “Mr. Beech did not violate Finra rules, he acted with the best interests of his clients and he intends to vigorously defend himself against Finra’s allegations.”

Beech has 20 disclosure items on his work history, according to his BrokerCheck report, ranging from settled customer disputes to a Wells Notice this summer. The notice is essentially a letter informing the investment professional of the substance of allegations and charges the regulator intends to bring.

“This complaint touches on a lot of hot button issues for Finra, from shades of affinity fraud and the confusing mixture of the broker-dealer and RIA sales channels,” said Andrew Stoltmann, a plaintiff’s attorney. “If Finra’s allegations are proven to be true, it’s likely that Mr. Beech could lose his securities license.”

Beech started working in the securities industry in 2013 and was the unnamed advisor’s sales assistant, according to Finra. At that time, Beech paid 75% of any commissions he earned to the unnamed advisor, who Finra in 2015 fined and suspended for trading in a customer’s account away from his member firm in violation of industry rules.

That person never was registered again with a Finra broker-dealer although he is a registered investment advisor. Beech registered with Western International Securities, where he worked through last year.

According to Finra, when Beech joined Western International Securities, he expected that the unnamed, Farsi speaking RIA advisor would continue to provide customer support to the customers, including by answering customers’ questions about specific securities investments and facilitating Beech’s communication with customers by translating from English into Farsi and vice-versa.

Beech paid $900,000 in commissions received from securities transactions via personal check, wire, or cashier’s checks and did not provide notice to, or receive permission from, any broker-dealer before making payments directly or indirectly to the unnamed RIA advisor.