December 20, 2013
You got a divorce. You got your hefty lawyer's bills from that divorce. You got a huge IRS tax bite that you can't pull away from. You wind up in bankruptcy. Then the customer complaints flood in. In retrospect, maybe all those alternative investments weren't such a great idea -- maybe they were. Who knows. Now it's all in the past but you're still left with a mess of a career.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Gary J. Chackman submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Gary J. Chackman, Respondent (AWC 2012031742301, December 13, 2013).
In 1990, Chackman first became registered; and from 2001 through through March 13, 2012, he was registered with FINRA member firm LPL Financial, Inc. The AWC asserts that Chackman had no prior relevant disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.
From July 2009 to February 2012, Chackman recommended real estate investment trusts (''REITs") and other alternative investments to at least eight of his LPL customers; and purchases were undertaken at periodic intervals for those accounts. In order to allegedly circumvent his firm's policies that limited the concentration of alternative investments in customers' account, the AWC asserts that Chackman regularly overstated on LPL forms the customers' liquid net worth - for example, over a period of 16 months, he submitted 16 alternative investment purchase forms tripling one customer's liquid net worth.
As a result of the alleged subterfuge, Chackman circumvented LPL's ability to monitor the concentration of alternative investments (as a percentage of liquid net worth) by falsifying data that kept the customers' profiles under the compliance radar. The AWC further charges that Chackman made unsuitable recommendations of illiquid alternative investments.
TERMINATION FOR VIOLATION OF LPL POLICIES AND PROCEDURES RELEVANT TO THE SALE OF ALTERNATIVE INVESTMENTS
In summing up the misconduct and charges, the AWC asserts that by:
- recommending unsuitable trans actions, Chackman violated NASD Conduct Rules 2310 and IM-2310-2 and FINRA Rule 2010; and
- falsifying documents and causing the Firm's books and records to be inaccurate, Chackman violated NASD Conduct Rule 3110 and FINRA Rule 2010.
In accordance with the terms of the AWC, FINRA imposed upon Chackman a Bar from associating with any FINRA member firm in any and all capacities.
Bill Singer's Comment
Sometimes a given Respondent's background offers context and perhaps the motivation fir alleged misconduct. Ultimately, we may never really know what pushed Chackman's buttons or what may have prompted his alleged misconduct; however, online FINRA records disclose that on:
- July 26, 2011, Chackman was granted a Chapter 7 discharge in bankruptcy;
- March 13, 2012, an $82,126.16 Internal Revenue Service tax lien was filed against Chackman pertaining to 2009 and 2010 taxes; and
- July 9, 2012, a $72,145 lawyer's lien was filed against Chackman that apparently emanated from:
[A] CONFESSED JUDGMENT FOR OUTSTANDING LEGAL FEES TO MY FORMER DIVORCE ATTORNEY
In addition to pending customer complaints, online FINRA records disclose the following settlements entered into by LPL with former customers of Chackman involving disputed alternative investments:
- $85,000 on August 28, 2012;
- $199,880 on April 2, 2013; and
- $461,947.50 on May 30, 2013.