May 31, 2016
In March 2016, Gary Lee Rathbun, former Registered Representative and General Securities Principal, and Douglas Scott Miller, former General Securities Representative, both formerly of Triad Advisors, Inc., submitted a Letter of Acceptance, Waiver and Consent (AWC) to FINRA to propose a settlement of the alleged violations of NASD Rules 3030 and 3040 and FINRA Rules 3270 and 2010.
According to FINRA, between July 2010 and June 2014, Rathbun and Miller conducted the sale of investments in six related limited liability companies (LLCs) that engaged in business lines such as factoring as well as equipment leases and venture lending to Private Wealth Consultants, Ltd. (PWC), a registered investment adviser in Toledo, Ohio. Rathbun and Miller are registered and owners of PWC. The investments were included in the assets under management for which PWC charged investment advisory fees. In most instances, Rathbun and/or Miller brought the potential investment to the attention of the client and subsequently assisted with preparation of required paperwork and the delivery of this paperwork to the sponsor company by a PWC employee, according to FINRA.
According to the AWC, Rathbun and Miller collectively sold approximately $25.5 million of investments in the LLCs to approximately 300 accounts tied to 187 unique clients, which included sales of approximately $3.3 million to 25 PWC clients who were also clients of Triad. Additionally, Rathbun and Miller allegedly sold $546,000 in other private investments to 17 PWC clients as well as making investments either directly or on behalf of their family members, totaling $230,000 in some of the same LLCs. Finally, the LLCs allegedly paid more than $600,000 between 2010 and 2014 to monitor their business activities, which included allowing Rathbun and Miller the ability to reject new leases and new factoring or other lending arrangements on behalf of the LLCs if they thought they presented too much risk.
Rathbun and Miller disclosed their ownership and operation of PWC to their broker-dealer, Triad, however, they allegedly failed to provide written notice of their participation in any of the previously stated activities between PWC and the LLCs thus potentially violating NASD Rules 3030 and 3040 and FINRA Rules 3270 and 2010.
By submitting the AWC, Rathbun and Miller do not admit or deny the findings, however, FINRA has imposed a bar from association with any FINRA member.