The Financial Industry Regulatory Authority fined a former broker of Advisor Group’s SagePoint Financial $5,000 for using $210,000 of clients’ funds to make undisclosed and unapproved private securities transactions, according to FINRA.
Between February and May 2017, the rep, Troy R. Baily, solicited investors to purchase securities in Future Income Payments, according to FINRA.
FIP had been engaged in a multimillion-dollar sham pension scheme in which investors were encouraged by a network of brokers and advisors to buy into “structured cash flows” through FIP.
SagePoint parent Advisor Group and Robert W. Futhey, an attorney at law firm Fraser Stryker who represented Baily in his dispute with FINRA, did not immediately respond to requests for comment Tuesday.
Without admitting or denying FINRA’s findings, Baily submitted a letter of acceptance, waiver and consent to FINRA Oct. 13 in which he agreed to the fine, as well as a six-month suspension from association with any FINRA member firm in any capacity. FINRA accepted the letter Monday.
Baily is no longer registered as a broker or RIA, according to his report on FINRA’s BrokerCheck website.
From November 2016 through March 2018, Baily was registered with FINRA as an investment company and variable contracts products representative, and associated with SagePoint.
On March 8, 2018, SagePoint filed a Form U5 terminating Baily’s association with the firm and registration with FINRA. On Sept. 13, 2019, SagePoint filed an amended Form U5 disclosing that Baily was the subject of a customer-initiated FINRA arbitration in connection with an investment contract, according to FINRA.
Baily sold $210,000 in FIP purchase agreements to four investors, including three who were customers of SagePoint, FINRA claimed, adding he received a total of $8,900 in commissions in connection with the transactions.
At all times during the stated period, his employer member firm prohibited its registered representatives from participating in private securities transactions without prior written approval from the firm, according to FINRA. He did not provide written notice to his firm before participating in the transactions involving FIP, nor did he obtain written approval from the firm, FINRA alleged.
In April 2018, FIP ceased business, owing almost $300 million in unpaid investor payments, FINRA said. In a March 12, 2019, indictment, the United States charged FIP and its owner, Scott A. Kohn, with conspiracy to engage in mail and wire fraud related to FIP’s operations, FINRA added.