December 10, 2020
On November 18, 2020, former general securities representative David Phillips consented to sanctions imposed by the Financial Industry Regulatory Authority (FINRA) Department of Enforcement to resolve allegations that he violated securities industry rules by participating in private securities transactions without prior disclosure to his member firm.
Phillips was associated with two FINRA member firms in Gilbert, Arizona within the past ten years: ProEquities, Inc. from February 2007 to December 2017 and Moloney Securities Co., Inc from November 2017 to November 2018. According to his FINRA BrokerCheck report, Phillips was permitted to resign after the firm alleged that he “failed to follow policies and procedures with respect to outside business activity.”
The Letter of Acceptance, Waiver, and Consent (AWC) states that Phillips solicited eight investors to purchase $876,636 in securities of Future Income Payments, LLC (FIP) between May 2017 and April 2018. The company represented itself as a structured cash flow investment in which pensions were purchased at a discount and sold to investors in portions as a “pension stream,” promising a 7% or 8% rate of return on their investment. Phillips allegedly received $33,184 in commissions in connection with the sales of these undisclosed securities.
FINRA Department of Enforcement asserts that Phillips did not disclose the private securities transactions to his associated firms, thus violating FINRA Rule 3280 and 2010. Without admitting or denying the allegations made against him, David Wallace consented to a nine-month suspension from associating with any FINRA member in any capacity and a $5,000 fine.
In April 2018, FIP ceased business even though the company owed $300 million in unpaid investor payments. FIP and its owner, Scott A. Kohn, were charged in federal court with conspiracy to engage in mail and wire fraud.
Phillips’ BrokerCheck report reveals two customer disputes related to FIP securities. In November 2018, one customer that alleged misrepresentation and unsuitability received $90,000 in a settlement from the $106,368.37 in damages that was requested. Another customer dispute that was filed in October 2020 is pending and alleges that the FIP investments were “misrepresented, improperly recommended, and unsuitable.”
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