Between May 2014 and October 2016, Michael Mandel participated in unauthorized investment transactions, also called selling away, in violation of securities industry rules. Michael Mandel solicited 18 investors to invest approximately $815,000 in 6 Degree Tequila, LLC (“6 Degree Tequila”), a tequila production company, without approval or knowledge from either of his brokerage firms. FINRA sanctioned Michael Mandel with suspension, a fine, and disgorgement of the funds received from the violative conduct.
During the period Michael Mandel engaged in selling away, he was employed by two different brokerage firms. First, he was registered with Royal Alliance Associates, Inc. (“Royal Alliance”) from August 8, 2008 through December 11, 2015. Then, Mr. Mandel was registered with LPL Financial LLC (“LPL”) from December 8, 2015 through February 11, 2022.
From May 2014 through October 2016, Michael Mandel invited investors to 6 Degree Tequila’s promotional events, introduced them to the company’s founder, and provided the investors with the paperwork needed to invest in the tequila company without knowledge or approval of his brokerage firm.
During that entire two-and-a-half-year period, Michael Mandel solicited 18 investors to invest a total of $815,000 in 6 Degree Tequila; 7 of those investors were brokerage firm customers. Mr. Mandel failed to request approval from his brokerage firm to participate in the sale of investments in the tequila company. Further, Michael Mandel lied in an LPL 2016 annual compliance questionnaire by stating that he had not participated in any private securities transactions outside of the firm.
Since these unauthorized investments in 6 Degree Tequila took place, the founder of the tequila company pled guilty to charges of making false and misleading statements to investors and misuse of investor funds. Additionally, in January 2022, the Securities and Exchange Commission filed a complaint against the founder for material misrepresentations to investors and misappropriation of investors’ funds for personal use.
Selling away is the term used for the sale of investment products by a financial advisor that are not offered by nor approved by their brokerage firm. It is dangerous for investors because little to no due diligence is being performed on the investment to protect the investor from potential severe financial consequences.
FINRA Rule 3280, previously FINRA Rule 3040, forbids a financial advisor’s participation in a private securities transaction without:
In other words, the sale of investments by a financial advisor without the approval of their brokerage firm is called selling away. It is a violation of the securities industry and can result in disciplinary action. These rules exist to protect the investor from properly vetted products which can lead to serious financial risks.
By default, a violation of FINRA Rules 3280 or the previous 3040 is a violation of FINRA Rule 2010 that requires financial advisors to conduct their business in a manner where they “observe high standards of commercial honor and just and equitable principles of trade.”
According to the Letter of Acceptance, Waiver, and Consent (“AWC”), signed by FINRA on March 2, 2022, Michael Mandel has received various sanctions for selling away. Specifically, Mr. Mandel agreed to:
Former customers of Michael Mandel who have experienced losses, and who have information relating to the manner in which he handled customer accounts, are encouraged to contact Lawrence L. Klayman, Esq., at (561) 997-9956, and download our Special Investor Report.
KlaymanToskes is a leading national securities law firm practicing exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. KlaymanToskes has recovered more than $228 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.