The Investor’s Watchdog

The Investor's Watchdog

Former Cetera Advisors Registered Representative Consents to Two-Year Suspension to Resolve Allegations of Participating in Unapproved Private Securities Transactions

Wednesday, March 25, 2020

On 3/18/20, the FINRA Department of Enforcement approved a Letter of Acceptance, Waiver and Consent (AWC) against former general securities representative Scott Kozak to resolve allegations that he participated in private securities transactions (PSTs) without providing prior written notice to or obtaining approval from his member firm at the time, Cetera Advisors LLC (Cetera).

According to his FINRA BrokerCheck report, Kozak was associated with Cetera in Highlands Ranch, Colorado from July 2001 to August 2018 and was discharged after allegedly violating firm policy prohibiting Personal Securities Transactions. Shortly thereafter, FINRA began investigating these allegations.

FINRA Department of Enforcement claims that between 2011 and 2014, Kozak solicited twelve Cetera customers and three Cetera registered representatives to invest nearly $1.2 million in two companies that were raising capital. Between July 2011 and September 2011, ten customers, two Cetera registered representatives and Kozak himself invested $603,000 in a privately-held technology company. Kozak created a company and opened a bank account to effect the transactions and process the funds transfers. Though Kozak’s customers did not incur losses on their investments, the PSTs were not within his scope of employment with Cetera nor did he receive prior approval from his firm.

In 2012, a Cetera customer connected Kozak to the president of a company that produced nutrition bars to speak to him about raising capital for the company. After the president provided Kozak with a sales forecast and a private placement memorandum, Kozak solicited six Cetera customers to purchase shares in the company. In 2013, three Cetera customers, Kozak and one Cetera representative purchased $250,000 in this company’s stock. In 2014, after learning that the president of this company was seeking debt financing through a convertible secured promissory note offering, Kozak solicited a total of $380,000 from seven Cetera customers to invest in these promissory notes. FINRA claims that Kozak again failed to notify or obtain approval from Cetera to participate in these PSTs.

FINRA further claims in the AWC that Kozak falsely stated in each annual firm compliance questionnaire from 2012 to 2016 that he had not engaged in any PSTs, even though he was engaging in PSTs regarding these two companies.

Kozak consented t/ a two-year suspension from associating with any FINRA member in any capacity and a $10,000 fine for violating violated NASD Rule 3040 and FINRA Rule 2010.

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Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

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