Finra Suspends Ex-LPL Broker Who Helped Bring Pro Soccer to Kentucky
A former LPL broker who helped finance a professional soccer team in Louisville, Kentucky, has been fined and suspended after the Financial Industry Regulatory Authority said his fundraising activities ran afoul of its private securities transaction rules.
Kallis between 2014 and 2017 solicited the investments and provided subscription agreements and other materials to the investors without first seeking LPL’s approval, violating Finra Rule 3280 requiring written notice of plans to participate in private securities transactions.
Kallis, who allegedly falsely attested in annual compliance questionnaires that he was not involved in private securities transactions, did not receive any compensation for soliciting the investment nor suggest that LPL had approved the investment, according to the consent letter.
But his activities also put him in violation of Finra’s wide-ranging Rule 2010 that requires brokers to observe high standards of commercial honor and just and equitable principles of trade, according to the consent letter.
The broker, who began his brokerage career in 2001 at Merrill Lynch and moved to LPL in 2010, settled the charges without admitting or denying the findings. He operates Meritrust Wealth Management, which is now affiliated with independent broker-dealer Kestra Investment Services.
Kallis is one of 47 owners of Louisville City FC, according to a local news report. He did not return a request for comment about the Finra sanction.
LPL discharged Kallis in November 2018 for violating its outside business activity and private securities transaction rules, according to his BrokerCheck report.
The Louisville City Football Club, which secured a $30 million bond in 2017 to finance its soccer stadium, became Kentucky’s only professional soccer team after it was relocated from Orlando in 2014. It is the first team to win back-to-back United Soccer League Cup championships in 2017 and 2018, according to media reports.
Other owners of the soccer team include several portfolio managers and executives from Louisville-based institutional asset manager River Road Asset Management, founders of public relations firm Ogilvy and Tandem, according to the “Courier Journal.”
Brokers have frequently run afoul of outside business activity and private securities rules, which are designed to help firms monitor for potential conflicts of interest or selling away issues that could influence broker activities with clients. Firms have lamented the imprecision of the rule, and Finra has proposed clarifying its guidelines.
“I’m not sure how many brokers completely comprehend and understand what the rules are and what the requirements are,” said Debra Jenks, a West Palm Beach, Fla.-based securities lawyer who is not involved in the case. “Firms need to have a more thorough educational program for brokers, and Finra does too.”