Former Principal Securities Financial Advisor, John Krohn, Subject of Three Pending Disputes
As disclosed through FINRA BrokerCheck, former dually registered stockbroker and investment adviser John Michael Krohn (Krohn, CRD No. 2722975), has been named or is otherwise involved in three pending securities arbitration disputes, as of the date of this writing. In aggregate, these three customer arbitrations seek damages of $39.2 million, for losses purportedly suffered due to Mr. Krohn’s recommendations to invest in certain private securities transactions. Specifically, the disputes concern investment recommendations for certain “venture capital companies owned, managed, or controlled at least in part by Krohn.”
John Krohn was a longtime securities professional with two decades of industry experience. From 1996 until 2017, he was employed as a broker and investment adviser by Principal Securities, Inc. (Principal Securities, f/k/a Princor Financial Services Corporation) of West Des Moines, Iowa. On June 4, 2018, Krohn consented to certain sanctions by FINRA Enforcement related to allegations that he “engaged in outside business activities and made personal purchases totaling $7.9 million of private securities away from his member firm without notifying it about these activities or purchases.” Through entering into a Letter of Acceptance, Waiver & Consent (AWC), through which Mr. Krohn neither admitted nor denied FINRA’s factual determinations, he agreed to a three-month industry suspension and the imposition of a $10,000 fine.
Pursuant to applicable securities laws and FINRA rules, wealth management firms like Principal Securities have a legal obligation to monitor their employees. Under FINRA Rule 3010, a broker-dealer must “establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations….”
In instances where a broker engages in the unilateral and independent sale of securities—through recommending an investment that is not on the brokerage firm’s approved list or otherwise offered through the broker’s firm—then that broker has engaged in “selling away.” FINRA Rule 3280 (formerly, NASD Rule 3040) prohibits a registered representative from selling any security “away” from his or her employer, without first notifying his or her firm in writing about the details of the proposed transaction, the broker’s proposed role, and whether he or she has received any selling compensation. And in those instances where a broker is engaged in impermissible selling away, the brokerage firm employing that financial advisor may be held liable for its failure to supervise through, among other things, facilitating comprehensive periodic audits designed to flag and address possible selling-away transactions.
Investors who have suffered losses with Michael Krohn, or another financial advisor, may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation to learn more about their legal rights. The attorneys at Giarrusso Law Group LLC have extensive experience with handling all manner of claims on behalf of investors who may have been victimized by securities fraud or related stockbroker or financial advisor misconduct.