Alex Williams (CRD# 2646185), a broker and investment adviser based in New York, has received a pending customer complaint. According...Read More
Scott Klor: FINRA Suspends Former LPL Advisor
A disciplinary action taken by the Financial Industry Regulatory Authority against former Fort Mill, South Carolina broker and investment advisor Scott Klor (CRD# 2493369) suspended him over allegations he participated in a private securities transaction in violation of FINRA rules. A former representative of LPL Financial, Klor was fined $5,000 and suspended from acting as a broker for 14 months as a result of these findings.
According to a Letter of Acceptance, Waiver, and Consent (No. 2017054221601) dated April 2019, Scott Klor solicited investors between September and December 2012 to “purchase a variable universal life insurance policy through a specially-formed LLC for approximately $1.4 million.” His role in the transaction provided Klor with an interest in the LLC of 4%. FINRA states that he did not notify LPL Financial of his involvement in the transaction, as FINRA rules require, thus violating FINRA rules.
FINRA’s findings state specifically that Scott Klor solicited investors to purchase a life insurance policy, structured as a viatical settlement, “on the life of an elderly individual with a terminal illness.” He assisted customers in the formation of an LLC that would buy the policy for $1.4 million, engaging in activities including communication with potential investors, assistance in the creation of sales transactions, and the consultation with other professionals about LLC formation. FINRA’s findings state he used his firm email account in his communications about the transaction with investors, and that he received a 4% interest in the LLC “which he requested be placed in his wife’s name.”
According to FINRA, seven people became members of the LLC, “excluding Klor’s wife,” although only five of these contributed money to it, and two of those five were LPL customers. The five “collectively owned approximately 90 percent of the LLC,” personally guaranteeing a loan of $2 million taken by the entity to buy the policy and pay future premiums on it. According to FINRA, the LLC’s managing member “was an executive with a bank for which Klor was an independent contractor.” FINRA’s findings go on to state that the LLC paid quarterly premiums on the insurance policy and interest payments on the loan for a period of “several years” while the insured party was alive; by early 2015, according to FINRA, “Klor’s wife no longer had an ownership” interest in it. The insured party died in August 2017, according to FINRA, at which point the policy’s death benefit “was worth less than the total amount invested,” and the LLC’s majority members “lost over $200,000.”
FINRA’s findings also note that while LPL Financial’s policies allowed representatives to participate in some private securities transactions, it required that they provide prior written notice and receive the firm’s approval, and it did not allow representatives “to participate in the offering of life or viatical settlements.” FINRA states that Klor did not provide the firm with notification of his participation in the viatical settlement, and indicated on several annual compliance questionnaires that he had not participated in a viatical settlement or “joint venture involving the pooling of investor funds for a common purpose.” As a result of the foregoing alleged conduct, Scott Klor was suspended from association with any FINRA member in any capacity for 14 months, and was ordered to pay a fine of $5,000.
Scott Klor is not currently registered as a broker or investment advisor. His employment history includes LPL Financial in Fort Mill, South Carolina, UVest Financial Services Group, Primevest Financial Services, and Commerce Brokerage Services. He currently holds no state registrations and has passed five securities industry qualification examinations.