The Financial Industry Regulatory Authority suspended an ex-NYLife Securities broker for 18 months after he failed to disclose his participation in an investment club and then repeatedly lied to the firm on its questionnaires concerning private securities sales he made related to that club, according to FINRA.
Broker David Quentin Kendrick signed a letter of acceptance, waiver and consent Wednesday in which he agreed to the suspension and to pay a $30,000 fine over his actions. He agreed to the letter without admitting or denying the findings. FINRA accepted the letter Thursday.
Between May 2002 and May 2018, Kendrick was associated with NYLife Securities as a general securities representative. Before that, he was registered with FINRA through two other firms: Lincoln Financial Advisors Corp. and the Lincoln National Life Insurance Co., in 2001-2002, according to FINRA’s BrokerCheck website.
Between November 2011 and January 2017, Kendrick “engaged in an outside business activity, as an officer, member and manager of an investment club, without providing prior written notice to NYLife, in violation of FINRA Rules 3270 and 2010,” according to FINRA. Between June 2010 and May 2018, Kendrick also participated in nine private securities transactions, without providing prior written notice of, or receiving written approval for, these transactions from NYLife, in violation of NASD Rule 3040 (for conduct occurring before Sept. 21, 2015) and FINRA Rules 3280 (for conduct occurring on or after Sept, 21, 2015) and 2010, FINRA said.
In a Uniform Termination Notice dated May 24, 2018, NYLife reported Kendrick’s resignation “after failing to disclose his participation in an investment club and other unapproved outside business activities, including investments in private placements,” according to the letter of acceptance, waiver and consent.
Kendrick was “permitted to resign after failing to disclose his participation in an investment club and other unapproved outside business activities including investments in private placements,” according to BrokerCheck. It added: “The company’s review found Mr. Kendrick invested his own money and provided information about investment opportunities to certain New York Life clients and other investors who invested in private placements.” That was the only disclosure listed for his 16-year career thus far.
In November 2011, Kendrick and eight other individuals (including two of NYLife’s customers) started an investment club, “TC,” according to FINRA. Kendrick was designated as a manager and agent and vested with the exclusive authority to manage and control the affairs of TC, while also receiving an irrevocable power of attorney, FINRA noted. Following his appointment, Kendrick managed TC’s financial and administrative affairs that included electing, introducing, and facilitating TC’s investments, according to FINRA.
But Kendrick did not disclose his participation in TC to NYLife until August 2015, when he first requested the firm’s approval of TC as an outside business activity, FINRA said. Kendrick also did not tell NYLife that he commenced his TC-related activities in November 2011 or that he had personally invested and facilitated the investment of others through TC, according to FINRA. Although the firm did not approve TC as an outside business activity, Kendrick continued his TC-related activities and continued to engage in outside business activities through TC until about January 2017, when he was again instructed by the firm to remove himself from TC’s registration” with the Louisiana secretary of state, FINRA said.
Kendrick also “made false statements to the firm on six annual compliance questionnaires and five branch audit questionnaires concerning his outside business activities,” according to FINRA.
Between June 2010 and May 2018, Kendrick participated in nine private securities transactions without providing prior written notice to or receiving written approval from NYLife, FINRA said. Meanwhile, Kendrick and five other individuals (including four of NYLife’s customers) also used another investment vehicle, known as “SCV,” to facilitate one of the investments. Through TC and SCV, “Kendrick solicited, recommended and facilitated investments totaling $290,000 in three private placements, including investments made by five Firm customers who were members of TC and SCV,” according to FINRA.
Kendrick’s participation in those private securities transactions included, among other things: “selecting and recommending investment opportunities to TC and SCV members; circulating information and scheduling meetings regarding the investment opportunity; collecting investment checks; and completing and signing investor questionnaires and stock purchase agreements on behalf of TC,” according to FINRA. Kendrick also personally invested a total of $106,297 in six different private placements, it said, adding that each of those investments were securities for which Kendrick and the other investors received equity interest in the form of membership units, shares and/or warrants.
In March 2018, NYLife conducted a review of Kendrick’s business and identified Kendrick’s continued activities on behalf of TC and SCV. One month later, Kendrick was interviewed by the firm as part of its investigation and Kendrick told personnel there that he was just a passive investor in TC and did not own any investments through the club, despite managing TC’s activities and personally investing in at least three private placements through TC, according to FINRA.
Kendrick also falsely told NYLife personnel he didn’t start SCV or solicit investors in it, according to FINRA. Kendrick also failed to disclose all his personal investments away from NYLife, FINRA said.
Kendrick isn’t currently registered or associated with a FINRA member firm. His attorney, Michelle Atlas of AdvisorLaw in Westminster, Colorado, didn’t immediately respond to a request for comment.
NYLife Securities also didn’t immediately respond to a request for comment. Earlier this month, the firm was censured by FINRA over its failure to enforce its written procedures for supervising what FINRA said were “higher-risk” mutual fund sales from September 2014 to December 2016 that were “subject to significant volatility.”