FINRA Lawyer Blog
In its quest for investor protection and market integrity, FINRA diligently seeks out firm representatives who are in violation of its strict rules. Recently, the regulatory authority decided to bar California-based Jim Jinkook Seol from the industry.
A former employee of Ameriprise Financial Inc.; Seol was found to have sold $100 million worth of EB-5, permanent residency-eligible, investments without disclosing the transactions to his employer.
The EB-5 visa program offers permanent residency to foreign nationals who invest between $500,000 and $1 million and create 10 jobs in a new business venture in the US. The program is especially attractive to wealthy individuals from emerging economies like China and India, and, as such, it holds an enormous profit potential for securities industry professionals.
Back in September 2011, while working for Ameriprise, Seol formed a company of his own, Western Regional Center (aka WRCI), to market EB-5 eligible investments to overseas investors.
He went on to travel to South Korea and China, where he was able to secure 200 investors. Each one of them contributed $500,000 to fund NextEra Energy Capital Holdings LLC’s Genesis Solar Energy Project, a solar power plant endeavor based in Riverside, California.
The total of WRCI-managed investments was $100 million. The deals earned Seol’s company $736,000 per year in management fees.
According to FINRA, “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.”
FINRA’s hearing panel found Seol’s claims of ignorance to be “incredible” and described his conduct as “egregious.” In fact, FINRA has very clear rules about outside business activities for registered persons. Rule 3270 establishes that,
“No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.”
Jim Jinkook Seol has, nevertheless, appealed the hearing panel’s decision before FINRA’s National Adjudicatory Council (NAC). The appeal is currently awaiting a decision.
Seol no longer works for Ameriprise, as he was fired when the firm found out about his outside business activities and his failure to disclose them. According to Brokercheck, Seol is no longer a registered broker and he was “discharged for violation of company policy related to an undisclosed outside business activity.” The chances of his appeal being successful remain rather slim.