Brandt provided written notice to his firm that he was engaged in sales of secured real estate notes outside the regular course and scope of his employment with the firm; however, the firm failed to recognize that the notes were securities and allowed Brandt to continue selling them without further supervision. Brandt again disclosed his sales of the notes on his annual Outside Business Questionnaire (OBQ) form, following which the firm determined that the notes were actually securities and ordered him to stop selling the notes and remove any mention of note sales from his OBQ. Thereafter, Brandt submitted a new OBQ devoid of any mention of note sales.
Brandt sold a note to a customer and received a commission of $3,459.21 for the sale although he failed to obtain the firm’s prior written approval to sell the note. Brandt sold additional notes to other customers without receiving any compensation for those sales and obtaining the firm’s prior approval. The total value of the notes Brandt sold, after submitting the new OBQ devoid of any mention of note sales, was $637,293.21. In addition, Brandt recommended and sold notes totaling $805,000 to other customers who were referred to him without having reasonable grounds for believing that his recommendations were suitable for these customers.
Moreover, Brandt failed to obtain information about these customers’ investment objectives, risk tolerances, financial circumstances or other information upon which he could reasonably base a suitability determination. Furthermore, Brandt relied upon representations from the referring individuals that they had analyzed the customers’ profiles and determined the notes to be suitable for the customers. Brandt received at least $54,450.00 in commissions for these sales.