FINRA Bars Longtime Broker for Selling Illegitimate Investments
Financial Industry Regulatory Authority has barred longtime broker, Michael Edward Magill, for allegedly participating in illegitimate investments.
Financial Industry Regulatory Authority has barred longtime broker, Michael Edward Magill, for allegedly participating in illegitimate investments that caused three investors to lose $700,000 – their entire investment.
In December 2018, while registered with Foreside Fund Services, Magill began working on behalf of an unnamed private issuer to find potential investors for a principal-protected note that it offered.
FINRA claims that Magill contacted prospective investors, provided them with marketing materials, explained the investment and terms of the note, and directed them to the issuer’s website to complete the paperwork necessary to make the investment.
Magill recommended the note to three investors, who invested a total of $700,000 over the course of two weeks. FINRA noted that he offered higher interest rates for “immediate” investments and told the investors that the opportunity was only available for a “short time.”
Magill earned $14,000 in commissions, a bonus for securing investments by the end of 2018, and the salary the private issuer paid him. None of the investors were Foreside customers, and he participated in the transactions without Foreside’s knowledge or consent, FINRA noted.
It turned out that the issuer’s notes were not legitimate investments, and the three investors lost their entire investment.
Prior to recommending the note, FINRA claims that Magill failed to conduct “reasonable diligence” to understand the features and risks of investing in the note.
In January 2019, the issuer stopped paying Magill’s salary and no longer reimbursed him for his business expenses. One month later, federal authorities shut down its offices.
An executive of the issuer, along with Magill’s supervisor, both pled guilty to conspiracy to commit wire fraud and were sentenced to prison. Another executive died while in custody awaiting trial.
Foreside’s policy regarding private securities transactions required registered representatives to submit the transaction in writing to the firm and receive the firm’s written approval prior to their participation.
Magill was previously registered as both a broker and registered investment adviser. According to his BrokerCheck profile, he was affiliated with Foreside from 2017 until 2019 and with WBI Investments, an RIA, for the same period. He was briefly affiliated with Crossroads Capital Distributors in 2016 and spent 11 years with Janus Distributors. Magill became a registered rep in January 1990.
Magill signed the AWC letter without admitting or denying FINRA’s allegations.
