A former broker with Principal Securities Inc. is facing a staggering $39.2 million in legal damages from at least three investor complaints that claim the broker, John Krohn, engaged in behavior with clients known as selling away, or offering clients investments that are not approved of by the firm.
Krohn, an independent contractor rep, was registered with Principal Securities from 1996 to 2017, according to his BrokerCheck profile. A local TV news report from 2019 characterized Krohn as being a top seller for Principal.
The Financial Industry Regulatory Authority Inc. in 2018 reached a settlement with Krohn in which he was suspended from the industry for three months and paid a fine of $10,000. In that settlement, Krohn, without admitting or denying the charges, consented to Finra's allegations that he engaged in outside business activities and made almost $8 million of personal securities purchases without notifying his firm.
Krohn is not now registered with any broker-dealer.
According to the annual audited financial statement it filed with the Securities and Exchange Commission at the end of last month, Principal Securities this August will have Finra arbitration panel hearings in which one of Krohn's clients, the Kemery family, is suing the firm for failure to supervise, negligence and other assorted charges.
Although he is not named in the SEC filing, Krohn is the broker at the center of the Kemery family claim, which totals $28 million, according to Andrew Stoltmann, the attorney for the family.
"Krohn was vintage, classic selling away," Stoltmann said in an interview Wednesday morning. "The investments were very small, almost embryonic companies that were also controlled by the broker."
"He was selling them to a lot of different clients in Iowa," Stoltmann said. "We have alleged more supervisory red flags than a Soviet May Day parade."
Krohn face two other investor arbitration complaints totaling $11.2 in damages and claiming similar shortcomings in Principal's supervision.
A spokesperson for Principal Securities, which is owned by the insurance company Principal Financial Group Inc., did not return calls on Wednesday to comment.
According to LinkedIn and Wikipedia posts, Krohn is now the president and CEO of a company called Spotlight Innovation Inc. A call to the company could not be completed on Wednesday because the phone had been disconnected.
The 2019 local TV news report about Krohn quotes the former broker as saying he was trying to make things right with his clients: "I'm raising money personally to put back into those companies. I'm focused in on making sure these things are successful and we ask people to be patient."
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.
"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
Chair also praised the passage of stablecoin legislation this week.
Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
