August 30, 2016
On July 29, 2016, Adam Estes, formerly a registered representative at J.J.B. Hilliard, W.L. Lyons, LLC based in Bloomington, Indiana, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) Department of Enforcement as a settlement proposal for alleged violations of securities industry rules.
Estes became a general securities representative for J.J.B. Hilliard in February 2000 and remained with it until July 31, 2016 when J.J.B. Hilliard terminated his position. According to the AWC, Estes personally invested over $1.2 million in four businesses, including a corporation that sold hazardous substance decontamination products and healthcare emergency preparedness services (DQ), a company that sold and owned real estate, a retail ice cream and food stand company, and a management consulting company. According to the AWC, Estes did not provide J.J.B. Hilliard with written notice of his investment and partial ownership, ranging between 7% and 50%, in each of these companies, in violation of NASD 3040 and FINRA Rule 2010. Additionally, Estes allegedly solicited J.J.B. Hilliard’s customers to invest in these companies as well as another company that produced and bottled alcoholic beverages. According to the AWC, Estes participated in private securities transactions totaling approximately $1.3 million, $652,060 which he personally invested and $577,000 which was invested by J.J.B. Hilliard’s customers.
NASD Rule 3040 states that no person associated with a FINRA member firm shall participate in any manner in any securities transaction outside the regular scope of their responsibilities at the FINRA member firm in which they are employed (i.e. private securities transactions – PSTs) and must provide written notice to his/her employer prior to participating in PSTs. Additionally, any person associated with a FINRA member firm should observe high standards of commercial honor and just and equitable principles of trade, as stated by FINRA Rule 2010.
According to the AWC, Estes also violated NASD Rule 3030 and FINRA Rules 3270 and 2010 for engaging in outside business transactions (OBTs) without providing prior written notice to J.J.B. Hilliard. Between May 2009 and February 2014, these OBTs included managing, among other duties, a company that purchased a limousine, bus, and shuttle van for its members’ personal use, serving as a member of DQ’s Board of Directors, and managing an LLC that purchased and owned a private airplane for its members’ use. According to the AWC, these OBTs are in violation of NASD 3030 and FINRA Rule 3270 and 2010 because Estes allegedly failed to provide J.J.B. Hilliard with prior written notice of his involvement. Additionally, FINRA claims that Estes further violated FINRA Rule 2010 by making misrepresentations and omissions on J.J.B. Hilliard compliance documents.
By signing the AWC, Estes consented, without admitting or denying the findings, to a 15-month suspension from association with any FINRA member in any capacity and a $15,000 fine.