From Broker to Dealer: Ohio Advisor Suspended, Fined for Concealing Pot Businesses
The Financial Industry Regulatory Authority has suspended former Royal Alliance Associates broker Darrin Farrow for one year and fined him $25,000 for setting up marijuana-growing businesses and asking customers to invest in one without firm approvals.
The 50-year-old former broker, who was in the securities industry for 26 years, opened a pot business called MAD Farmaceuticals in Rocky River, Ohio, in 2012, and in early 2015 raised around $1 million from six clients who bought membership interests in an affiliate called MAD Oregon, according to Finra.
While Farrow’s pot-growing and distribution companies are legal, his activities violated Finra Rule 3270 on outside business activity disclosure and Rule 2010 on observing high standards of commercial honor and just and equitable principles of trade, Finra said on its enforcement website last week.
In a phone interview, Farrow said he is unlikely to return to the brokerage industry because prospects are so bright in pot.
“It is the fastest growing [business] in the United States,” he said. “It’s like opening a distillery post-prohibition.”
Royal Alliance “permitted” Farrow to resign in May 2015, according to his record in the FINRA BrokerCheck database. A spokesman for the independent broker-dealer, which was sold along with other units of AIG Advisor Group last month to Lightyear Capital, did not return a call for comment.
In a March 2015 profile of Farrow, Crain’s Cleveland Business praised the business acumen of the new breed of pot entrepreneurs.
“They aren’t the stoners with whom you rubbed elbows (or were) in college, but rather a group of guys who already made names for themselves in other businesses and are now looking to capitalize on what some analysts characterize as the fastest-growing industry in the United States,” the article said.
None of Farrow’s clients who invested in MAD Oregon have complained to him, he told AdvisorHub. He would not comment on whether they remained investors in the company or still have accounts with his former employer.
Following his departure from Royal Alliance, Ohio’s state securities division suspended him in July 2015 for 45 days. He was working at the time for another independent broker-dealer, Triad Advisors, but left Triad last month.
Joseph Kuo, a spokesman for Triad Advisors, said the company does not discuss regulatory matters related to individuals formerly associated with the firm.
(Corrects paraphrasing in final graph to clarify that Farrow was an associated person, not an employee.)