FINRA Hearing Panel Bars Registered Representative for Failing to Disclose Private Securities Transactions Totaling $100 Million in EB-5 Investments
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that a FINRA hearing panel barred an Irvine, California-based registered representative, Jim Seol, for participating in private securities transactions, engaging in undisclosed outside business activities, and for making misrepresentations to his employer in compliance questionnaires. The hearing panel found that Seol sold $100 million in EB-5 investments promoted through his private business, Western Regional Center Incorporated (WRCI), yet failed to disclose this activity to his employing firm. FINRA rules and the member firm’s policy required Seol to disclose and obtain prior approval for all outside business activities. The decision resolves charges brought by FINRA's Department of Enforcement in May 2016.
According to the hearing panel decision, in September 2011, Seol formed WRCI to market U.S. investments to overseas investors through the U.S. government’s EB-5 program. The EB-5 program permits foreign investors to obtain a U.S. visa in exchange for investing in projects that create U.S. jobs. After identifying a potential investment opportunity for WRCI involving a solar energy power plant in Riverside, California, Seol traveled to South Korea and China to market the investments to foreign migration companies and attorneys. As noted in the decision, by the end of 2013, the offering was fully subscribed with all partnership units sold to 200 different investors contributing $500,000 each, totaling $100 million. WRCI earned a management fee from the offering that generated $736,000 per year. The hearing panel found that from 2012 to 2014, Seol intentionally concealed his WRCI activities from his employing firm in multiple instances by repeatedly lying to his supervisor and the compliance examiner that he had “no outside business activities, no outside employment, no outside board memberships, and no ownership interest in any legal entities.”
In addition, according to the decision, Seol claimed at the hearing that he did not believe the firm’s policy against outside securities transactions applied to his solicitations through WRCI because he did not understand the limited partnership interests sold to investors to be securities. The panel concluded that the limited partnership interests were securities, and found Seol’s claim that he believed otherwise “incredible” given the fact Seol had discussions with a business partner acknowledging that the interests were securities. In assessing sanctions, the panel found Seol’s conduct “egregious.”
Unless the hearing panel's decision is appealed to FINRA's National Adjudicatory Council (NAC), or is called for review by the NAC, the hearing panel's decision becomes final after 45 days.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2016, members of the public used this service to conduct 111 million reviews of broker or firm records. Investors can access BrokerCheck at http://www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
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