The Financial Industry Regulatory Authority suspended an ex-Merrill Lynch general securities representative for 21 months and fined him $15,000 for engaging in outside business activities that included ownership of a professional video game team without providing prior written notice to Merrill Lynch, according to the regulator.
Without admitting or denying the findings, Christopher M. Roumayeh submitted a letter of acceptance, waiver and consent to FINRA May 7 in which he agreed to the regulator’s sanctions. FINRA accepted the letter Wednesday.
Merrill Lynch declined to comment Thursday on Roumayeh and his dispute with FINRA.
Roumayeh “realizes he made a mistake and FINRA has every right to hold advisors accountable for their mistakes,” Brandon Taaffe, an attorney at the Sarasota, Florida, office of law firm Shumaker, Loop & Kendrick, which represented the ex-Merrill rep in his dispute with FINRA, told ThinkAdvisor on Thursday.
Roumayeh became associated with Merrill in October 2008. In a Form U5 filed July 3, 2019, Merrill “reported Roumayeh’s resignation while under internal review for, among other things, an undisclosed outside business interest,” according to the AWC letter.
During the period of June 2014 through June 2019, the rep engaged in two outside business activities without providing prior written notice to Merrill. Specifically, Roumayeh and a Merrill customer of his bought a “franchise involved in the professional video gaming industry,” FINRA said, without identifying the franchise. As its owner, Roumayeh managed the franchise’s day-to-day operations.
Roumayeh also formed five corporate entities related to the franchise’s operations, serving as an officer and director for them, and “solicited prospective investors” in the franchise, according to FINRA. In addition, he formed and managed a separate limited liability company through which he acquired commercial real estate, FINRA said.
By engaging in outside business activities without providing prior written notice to Merrill Lynch, Roumayeh violated FINRA Rule 2010 (governing standards of commercial honor and principles of trade) and 3270 (governing outside business activities of registered persons), according to FINRA.
In March 2019, Roumayeh participated in a private securities transaction by soliciting a publicly traded company, identified by FINRA only as “Company X,” to invest about $5.5 million in exchange for shares in the video game franchise, the regulator said. Roumayeh participated in that private securities transaction without notifying and receiving prior written approval from Merrill Lynch, in violation of FINRA Rules 3280 (governing private securities transactions of an associated person) and 2010, according to the regulator.
There were no disclosures cited on Roumayeh’s profile on FINRA’s BrokerCheck website for his 17 years of FINRA association. Although he is no longer registered as a broker, he is still an RIA, according to BrokerCheck.
Roumayeh “appreciates FINRA’s fairness and [willingness] to resolve the issue with him,” according to Taaffe, who told ThinkAdvisor his client was “still involved in the gaming/esports industry [and] still involved in the RIA business.” The attorney declined to name the esports team. The advisor firm his client is currently working for is Capital Asset Advisory Service in Bloomfield Hills, Michigan, according to the SEC’s website.
“What kind of happened here is he had kind of a side project/passion project that kind of turned into a lot more over the years and he did not disclose it properly, and he was held accountable for failure to disclose that,” Taaffe explained, adding: “It kind of started as a hobby and the esports industry has grown and it turned into a lot more than that.
“We were very transparent with FINRA. We did our best to cooperate and FINRA, we believe, was fair, and we appreciate their dealing with us in that manner,” the lawyer said, calling it a “cautionary tale to other advisors.”
His advice to other advisors: “Make sure you disclose your outside business activities and make sure that when you’re involved in a FINRA investigation you cooperate fully with FINRA because your failure to cooperate can get you a ban…. We’re happy not to have a ban. We’re happy with what we believe is a fair suspension and looking to move forward after a mistake.”