by Structured Settlement Watchdog
It is a legal requirement for FINRA registered persons brokers and SEC registered investment advisers to make outside business activity disclosures.
Rule 3270 Duty to Disclose Outside Business Activities of Registered Persons
No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.
3270.01 Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person’s responsibilities to the member and/or the member’s customers or (2) be viewed by customers or the public as part of the member’s business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member’s review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person’s outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of Rule 3280. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1)
The Case of Wall v Altium Group
Roy D’ Alessandro was the Wall’s financial adviser. Looking at D’Alessandro’s public records on Finra Broker Check and the most current IAPD report this is what it says: “VARIOUS COMPANIES, SALES & SERVICE OF GROUP HEALTH, LIFE AND DISABILITY, 1/4/2010, NOT INVESTMENT RELATED, 60-80 HOURS PER MONTH, PA”. No mention at all about structured settlement annuities or any annuities whatsoever or factored structured settlement payment streams or structured settlement derivatives or receivables. Nothing, nada!
Upon information and belief a claim was made against D’Alessandro for which D’ Alessandro settled. For some reason there is no disclosure of this event on Roy D’Alessandro’s FINRA or SEC records. The question is why?
- Roy ‘Alessandro made or advised the Walls on one or more purchases of factored structured settlement payments streams (structured settlement receivables)
- Public documents indicate that Roy D’ Alessandro’s clients believed them to be structured settlement annuities, even though that is a factual impossibility. They were structured settlement receivables.
- Public documents indicate that Roy D’ Alessandro himself believed what he advised the Walls to purchase were structured settlement annuities, even although that is a factual impossibility. They were structured settlement receivables.
- On November 8, 2011, the Walls and Altium signed a “Master Structured Settlement Receivable Purchase and Sale Agreement and Non-Circumvention Agreement.” Under this agreement, the Walls wired Altium a $5,000 deposit on the purchase price and agreed to wire Altium the balance upon receipt of the Closing Book. See Wall v. Altium Grp., LLC (Wall v. Altium Grp., LLC, CIVIL ACTION NO. 16-1044 (W.D. Pa. Mar 28, 2017)) – vLex United States
- It is indisputable that Roy D’ Alessandro’s clients paid $152,999 for the subject factored structured settlement payment streams and received nothing.
Factored Structured Settlement Payment Streams and Mandatory Disclosures of Outside Business Activity
How does the sales and solicitation and possible origination of factored structured settlement payment streams get reported as an outside business activity?
- Considering that some intermediaries with insurance and securities registrations have grossly misrepresented factored structured settlement payment streams (structured settlement receivables) as annuities, is it acceptable or permissible for FINRA brokers or SEC-registered advisers to omit disclosure of the outside business activity of soliciting such payment streams, which are explicitly not recognized by the National Association of Insurance Commissioners as annuities or insurance products?
- In light of the Wall case, it may be prudent for FINRA and the SEC to increase their scrutiny.