An adviser's investments in ice cream, real estate and hazardous waste decontamination products have landed him in hot water with FINRA.
The regulator last week suspended a top producer at Hilliard Lyons for 15 months for engaging in private securities transactions without his firm's permission that totaled over $1.2 million, according to a copy of a disciplinary report.
Adviser Adam Estes generated over $5.25 million in annual revenue and oversaw more than $825 million in client assets in 2014, according to his former employer. The Bloomington, Indiana-based adviser ranked first on On Wall Street's Top 10 Regional Advisers for 2014, and had previously ranked in the top 10 advisers under age 40
In addition to the suspension, FINRA also fined Estes $15,000. The regulator says that Estes engaged in 11 private securities transactions between May 2012 and March 2014, and did not provide written notice to Hilliard Lyons.
For one of the transactions, he solicited a Hilliard Lyons' client to invest $40,000 in a business that Estes had also invested in.
LEAVE OF ABSENCE
A Hilliard Lyons spokesman said Estes is not currently on the firm's payroll, but that he is expected to return.
Estes started his advisory career at the Louisville, Kentucky-based firm in 2000, according to BrokerCheck records. Estes said in a statement provided by the spokesman that he was taking a leave of absence for personal reasons.
"I fully intend to come back, and that is absolutely what I intend to do after I get my affairs in order. In the meantime, my father David, a Hilliard Lyons Financial Consultant who is also a CFP, will be taking care of clients. I look forward to coming back refreshed and ready for the rest of a long career, and thank my clients for their trust and loyalty," he said.
He could not be reached for additional comment.
Without admitting or denying the findings, Estes consented to FINRA's findings and the regulator's sanctions, according to FINRA's disciplinary report. This was Estes' first sanction by the regulator, according to the regulator. He has only one other disclosure on his BrokerCheck record, a client complaint for $14,000 that was denied.
ICE CREAM, REAL ESTATE AND MORE
The transactions involved five small businesses in which Estes was an investor, according to FINRA, which did not name the companies. In the largest transaction, Estes invested $251,000 in a real estate business, taking a 50% ownership stake, according to FINRA. The other businesses included an ice cream stand and a firm that sold hazardous waste decontamination products and healthcare emergency preparedness services.
Registered representatives can engage in outside business activities under FINRA rules, but must provide written notice to their firm, the regulator says, "describing in detail the proposed transaction and the person's proposed role therein and stating whether [the adviser] has received or may receive selling compensation in connection with the transaction."
FINRA says that Estes made misrepresentations and omissions about the outside business activities on 11 annual questionnaires and other compliance documents between 2010 and 2014.
Moreover, Hilliard Lyons compliance policies required employees to provide the firm with written notice of their intent to engage in any private securities transactions, according to FINRA.
In the summer of 2013, Estes solicited one of Hilliard Lyons' clients to invest in the ice cream company. That client invested $40,000 in July 2013, according to FINRA. He also solicited two other investors, who were not Hilliard Lyons' clients, for funds.
The transactions totaled more than $1.2 million, of which Estes provided about $652,000 and other investors he solicited provided $577,000.
