Littleton, Colorado Registered Representative Barred from FINRA Firms for Executing $16 Million in Securities Sales without Firm ApprovalFriday, November 22, 2019
A former registered representative, Jun Zhou, recently submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) Department of Enforcement to resolve allegations of participating in private securities transactions totaling over $16 million without obtaining prior approval from her member firm at the time.
According to her FINRA BrokerCheck report, Zhou was associated with The Leaders Group, Inc. in Littleton, Colorado from November 2015 to August 2018. On August 2, 2018, The Leaders Group reported that Zhou had been discharged for “unauthorized outside business activity that involved a private securities transaction.” Shortly after receiving the Form U5, FINRA Department of Enforcement began investigating this allegation.
FINRA Department of Enforcement asserts that from April 2017 to August 2018, Zhou participated in 27 private securities transactions, with sales of $16,050,000 and selling compensation of $199,000, without providing prior notice or obtaining approval from The Leaders Group. Through 15 transactions with seven investors, Zhou sold $9,050,000 in membership interests in private real estate funds managed by a third party and $5 million in a promissory note with the third-party fund manager both individually and through a small real estate company she owned and controlled. For her participation in the sales, her real estate company received $179,000 in compensation from the third-party fund manager.
On June 4, 2018, Zhou established Zhou Fund LLC, a private real estate fund managed by her real estate company, and filed a notice of exempt offering of securities with the Securities and Exchange Commission. Then, in June and July 2018, Zhou and her real estate company sold $2 million in membership interests in Zhou Fund to twelve investors, including three customers associated with The Leader Group. For these transactions, the real estate company received a $20,000 sourcing fee and quarterly asset management fee beginning in 2019 from the Zhou Fund.
Based on the foregoing, Zhou violated FINRA Rules 3280 and 2010 for failing to disclose her participation in the private securities transactions to her member firm and did not receive approval to participate in the transactions. Without admitting or denying the allegations made against her, Zhou consented to a bar from association with any FINRA member firm in any capacity.
Oftentimes brokerage firms can be held liable for the brokers’ misconduct if they failed to supervise them while registered at the firm. If you lost money due to Jun Zhou’s alleged scheme, you may be able to recover from her or The Leaders Group, Inc., the brokerage firm where she was registered. Since 1998, the experienced attorneys at ChapmanAlbin LLC have been fighting for victims of investment fraud and broker misconduct. Call us today at 1-877-410-8172 for a free consultation.