Securities Arbitration Lawyer Blog
FINRA has suspended Stewart Schram from the securities industry for four-months for engaging in outside business activity and private securities transactions without firm approval. In addition to his suspension, Mr. Schram was also fined $7,500.
FINRA began its investigation after receiving a regulatory tip. Mr. Schram is no longer associated with any FINRA member but remains subject to FINRA’s jurisdiction.
If you have lost money with Stewart Schram, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA AWC
Mr. Schram and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 19, 2021, over the following findings:
- Between April 2013 and February 2015, Mr. Schram engaged in an outside business activity without providing written notice to his firm, in violation of FINRA rules.
- Between May 2013 and February 2015, Mr. Schram engaged in private securities transactions without providing prior written notice to his firm.
At the time, Mr. Schram was registered with broker-dealer Kingsbury Capital in Northbrook, IL.
Outside Business Activities
FINRA Rule 3270 prohibits registered persons from engaging in an outside business activity without providing written notice to their firm.
Between April 2013 and February 2015, Mr. Schram engaged in an outside business activity involving real estate properties through multiple limited liability companies (“LLCs”).
Mr. Schram was involved in the management of the outside business activity, including through maintenance of the LLCs’ books and records. Mr. Schram had a reasonable expectation of compensation resulting from this business activity, which was outside the scope of his relationship with Kingsbury Capital.
Mr. Schram failed to provide prior written notice to Kingsbury Capital that he would be engaging in this outside business activity. Mr. Schram also did not list this business activity on an October 6, 2014, annual compliance questionnaire. In February 2015, Mr. Schram self-reported the activity to the firm.
Private Securities Transactions
NASD Rule 3040 prohibits persons associated with a member from participating in private securities transactions outside the scope of their employment without providing prior written notice to their firm. This practice is also known as “selling away.” You can read more about it here.
In April 2013, Mr. Schram and a business partner formed one LLC to engage in real estate activities.
Between May 2013 and January 2015, Mr. Schram participated in private securities transactions by soliciting 13 individuals, comprising his friends and family, to invest $485,000 in this particular LLC. Six of the individuals were Kingsbury Capital customers at the time of their respective investments. Mr. Schram did not receive any compensation for soliciting investments, nor did he represent or suggest that the investment had been approved by Kingsbury Capital.
However, Mr. Schram failed to provide written notice to Kingsbury Capital prior to participating in the sales and did not obtain approval from the firm prior to his participation.
Stewart Schram (CRD#: 1711571)
Stewart Schram has 27 years of experience in the securities industry and has been registered with the following firms:
- Cambridge Investment Research, Inc., Buffalo Grove, IL (July 12, 2018 – October 31, 2019);
- Freedom Investors Corp., Northfield, IL (February 3, 2014 – January 5, 2015); and
- Kingsbury Capital, Inc., Northbrook, IL (December 19, 1991 – July 12, 2018).
Duty to Supervise
FINRA members, like Kingsbury Capital, must properly supervise financial advisors and customer accounts. Brokerage firms are required to establish and maintain a reasonably designed system to oversee account activity, and to supervise its financial advisors, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its brokers or the customers’ account activity, it may be liable for investment losses sustained by customers.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with Stewart Schram, or Kingsbury Capital, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.