Our law firm is investigating LPL Financial (“LPL”) and VALIC Financial Advisors in connection with the supervision of Jodie L. Miler (“Miller”), CRD No. 4772684. Miller was based out of Tampa, Florida. On November 12, 2014, Miller entered into a Letter of Acceptance, Waiver and Consent (“AWC”) with the Financial Industry Regulatory Authority (“FINRA”), in connection with allegations of selling away. Selling away occurs when a broker sells products to her customers without prior approval from her employer broker-dealer. In the AWC, Miller consented to a suspension from association with any FINRA member for 18 months, a fine of $53,225, which includes disgorgement in the amount of $38,225, plus interest.
According to the AWC, “”From January 16, 2012 through November 27, 2012, while registered with VALIC and LPL, [Miller] participated in 19 sales of unregistered Tri-Med notes in amounts ranging from &10,000 to $150,000. Those 19 transactions involved 14 investors and a total of $764,500 in Tri-Med notes. Tri-Med paid Miller approximately $38,225 in commissions for the sales. Miller did not tell VALIC and LPL of her involvement with Tri-Med, nor did she request approval from either of them to sell Tri-Med securities. Six VALIC customers purchased Tri-Med notes from Miller and at least one of those customers believed that he was purchasing a product that VALIC was recommending. Miller did not have a reasonable basis for recommending the notes. As referenced above, Tri-Med’s claim that its securities were exempt from registration was false and there were red flags that should have led Miller to question its claim. She did not conduct adequate due diligence of Tri-Med prior to selling Tri-Med notes. Moreover, for many of those to whom she recommended purchases of Tri-Med notes, Miller did not obtain, or maintain records reflecting, information about the customer’s basic involvement profile, such as age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, or other considerations. Thus, she did not have information necessary to make a determination that the Tri-Med notes were a suitable investment.”
“According to its sales literature, Tri-Med’s business involved financing account receivables for personal injury claims. Tri-Med purchased from medical providers, at discounted rates, outstanding receivables relating to personal injury claims, with the expectation that insurers would pay the entire receivable once the claim was resolved through litigation or settlement. To fund its purchases, Tri-Med sold interest-bearing notes collateralized by Letters of Protection (“LOP”). All but two of the notes that Miller sold bore interest of 8% per year; the other two had rates of 6.5%. The LOPs allegedly assured that the receivable would be repaid from any proceeds obtained as a result of the settlement or litigation.”
“Miller first learned of Tri-Med in late 2011 and around that time conducted some, but inadequate, due diligence on Tri-Med,” the AWC further states. “Virtually all of the information she obtained came from Tri-Med itself. Miller claimed to have reviewed one report from an independent source – the Better Business Bureau. The information included a letter, purportedly from the issuer’s counsel, stating that the Tri-Med notes were exempt from registration and, among other things, qualified for treatment under the safe harbor provisions of Regulation D and “Rule 507.” This letter should have raised serious questions and concerns on Miller’s part. There is no Rule 507 exemption under Regulation D, and never has been, which Miller, as a securities professional, should have known. Moreover, a cursory review of filings on the SEC website would have shown that Tri-Med had never filed a Form D, which is required for any private offering seeking to qualify under the safe harbor provisions of Regulation D. Miller, however, did not review the SEC’s website. In fact, the Tri-Med notes were unregistered and no exemption from registration applied.”
The AWC further states, “In March 2014, Florida’s Office of Financial Regulation (“OFR”) sued Tri-Med and five of its officers, alleging that they were selling unregistered securities and operating a Ponzi scheme. Among other things, medical providers from whom Tri-Med supposedly purchased claims stated that they had never done business with Tri-Med. OFR obtained a temporary restraining order against Tri-Med and the court has appointed a receiver to marshal the company’s assets. By participating in unregistered sales of Tri-Med notes, Miller contravened Section 5 of the Securities Act and therefore violated FINRA Rule 2010. Because she failed to notify, or obtain approval from, VALIC and LPL prior to participating in the Tri-Med notes sales, Miller also violated NASD Rule 3040 and FINRA Rule 2010. In failing to conduct adequate due diligence on Tri-Med, and in failing to have a reasonable basis for recommending Tri-Med notes, Miller violated NASD Rule 2310 and FINRA Rules 2111 and 2010.”
If you invested in Tri-Med through Jodie Miller, please contact our law firm, toll free, at 888-997-9956.