FINRA Sanctions Cetera Stockbroker For Selling Away
Scott Patrick Kozak of Highlands Ranch Colorado a stockbroker formerly registered with Cetera Advisors LLC has been fined $10,000.00 and suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that he engaged in undisclosed private securities transactions and outside business activities. Letter of Acceptance Waiver and Consent No. 2017053017203 (Mar. 18, 2020).
According to the AWC, during the time that Kozak was associated with Cetera Advisors, he solicited ten customers of the securities broker dealer to make outside investments in stock issued by Company A. Kozak’s customers invested a total of $570,000.00 after being solicited by him. Cetera Advisors was never provided any notification from Kozak pertaining to the customers’ investments in Company A. He also lied on at least five compliance questionnaires administered by Cetera Advisors in regard to selling away.
The AWC stated that three customers of Kozak had been steered towards investing $150,000.00 in Company B. Cetera was not made aware of these transactions and did not authorize Kozak to facilitate purchases of investments in Company B outside of its auspices. When Kozak was confronted by the securities broker dealer about investing in Company B, he told the Chief Compliance Officer that there were none of its customers who invested in Company B. This was apparently not true.
The AWC also stated that Kozak also neglected to inform Cetera about soliciting customers for their purchases of promissory notes in Company B. FINRA stated that Company B’s debt securities offering was made known to at least seven of those customers after Kozak was formally reprimanded for having failed to disclose his investments in Company B. Customers collectively purchased $380,000.00 in promissory notes. At no time did Kozak report his involvement in these promissory notes transactions to his employer. He also lied about the transactions when completing compliance questionnaires for the years 2013 to 2016. FINRA determined that Kozak’s conduct was violative of FINRA Rules 2010 and NASD Rule 3040.
FINRA also determined that Cetera was not advised by Kozak concerning his outside business activities from January of 2016 to March of 2017. The AWC stated that due diligence was undertaken by Kozak in 2015 concerning Company B’s business when it was on the verge of being sold. He also created and ran another company in January of 2016 to buy Company B’s assets. Kozak violated FINRA Rules 2010 and 3270 for failing to inform Cetera about his activities and for making false statements in the compliance questionnaires regarding his outside business activities.
FINRA Public Disclosure reveals that Kozak has been identified in four customer initiated investment related disputes containing allegations of his misconduct during the time that he was associated with Multi Financial Securities Corporation. A customer was awarded $51,750.00 in compensatory damages based upon Kozak being found liable for causing the customer’s losses. According to the claim, misrepresentations were made about investments and the customer had been defrauded. The claim also alleges negligence and breach of fiduciary duty pertaining to mutual fund transactions effected in the customer’s account.
Kozak was discharged by Cetera Advisors on August 2, 2018 based upon allegations of his failure to comply with the securities broker dealer’s policy regarding securities transactions.