According to a FINRA Disciplinary Action disclosure, Eduardo Guillermo Diaz (CRD #1621873, Ocean Springs, Mississippi) recently submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Diaz consented to the sanction and to the entry of findings that during telephone conversations and in written communications, he intentionally or recklessly made untrue statements of material fact to a customer regarding properties of a limited liability company he controlled.

The findings stated that as a result of his conduct, Diaz willfully violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. The customer’s investments in the company and the loan to it, which totaled at least $365,000, were not paid directly from her account at Diaz’s member firm. Amounts withdrawn from the customer’s account were transferred to her checking account at a bank. At Diaz’s request, the customer then wired the funds comprising the investments and loan to a personal bank account Diaz controlled. In reliance upon representations Diaz had made, the funds the customer provided to him were intended for use by the company for its general business operations. Diaz’s bank account was comprised almost entirely of funds from the customer for purposes of her investments and the loan.

The findings also stated that Diaz improperly converted at least $126,000 of these funds in his bank account to his personal use for expenditures that did not benefit the company or the customer. Diaz executed transactions in the customer’s account, without her prior knowledge, authorization or consent. The unauthorized transactions in the customer’s brokerage account at Diaz’s firm resulted in more than $195,000 in cash that he sent to the customer, which she believed were distributions from the company.

The findings also included that Diaz, allegedly acting outside of his employment with his firm, participated in private securities transactions for compensation with the customer without providing prior written or oral notice to the firm of his proposed role in, or the selling compensation that he might receive from the transactions. The firm purportedly did not approve Diaz’s private securities transactions with the customer. Diaz engaged in business activities with his company outside the scope of his relationship with the firm, without providing prior written notice to the firm or receiving its written approval. Diaz’s participation in the company was not passive. Diaz was a member and manager of the company and received approximately $126,000 in compensation as a result of his business activity with it. FINRA found that Diaz solicited loans from the customer totaling $87,000. The loans were deposited into Diaz’s personal bank account. Diaz failed to notify his firm of the loans the customer had made. Firm policy prohibited Diaz from borrowing from customers in all circumstances.

For the full details of FINRA’s investigation, see FINRA Case #2012034594402.

In addition to the regulatory action discussed above, Mr. Babcock’s FINRA Broker Report indicates that he has also been the subject of 2 customer complaints.  His Broker Report also indicates that he was employed by Kovack Securities from December 2012 through January 2013 and NEXT Financial Group from December 2008 through November 2012.

The foregoing information, which is publicly available on FINRA’s website, is being provided by The White Law Group.  The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For a free consultation with a securities attorney, please call The White Law Group at 312/238-9650.  For more information on the firm, visit https://whitesecuritieslaw.com.