FINRA Suspends Former LPL Broker David J. Taddeo Over Undisclosed Private Securities Transactions

The Financial Industry Regulatory Authority (FINRA) has taken disciplinary action against David J. Taddeo (CRD #1163829), a former broker associated with LPL Financial. According to FINRA, the action resolves allegations that Taddeo participated in undisclosed private securities transactions involving firm customers and later settled related complaints outside the firm without disclosure. FINRA alleges the conduct violated firm procedures and FINRA rules governing private securities activity and standards of commercial honor.

FINRA alleges the promissory note investments were made without firm approval and later defaulted, after which Taddeo allegedly repaid certain customers without reporting the complaints to LPL. The matter was resolved without Taddeo admitting or denying the findings, and FINRA imposed a suspension and monetary fine.

Private Securities Transactions Outside Firm Approval

According to FINRA, David J. Taddeo participated in private securities transactions involving three LPL Financial customers without providing prior written notice to the firm or obtaining approval.

The regulator states that between August and September 2020, Taddeo solicited the customers to invest a total of $255,000 in promissory notes issued by a company involved in financial debt instrument arbitrage. These transactions were allegedly conducted outside the scope of his employment with LPL.

FINRA contends that Taddeo’s role extended beyond a passive referral. The AWC states that he introduced customers to the investment opportunity, provided information about the issuing company, and assisted two customers in liquidating assets held in their LPL brokerage accounts to fund the investments. The filing further alleges that the required written notice was never provided and firm approval was not obtained.

Alleged Concealment and Undisclosed Complaint Settlements

The AWC also describes alleged inaccuracies in Taddeo’s annual compliance questionnaires from 2020 through 2022. According to FINRA, he reported that he had not participated in private securities transactions or offered promissory notes outside the firm, statements the regulator contends were inconsistent with his conduct.

After the promissory note issuer later defaulted, two customers raised complaints directly with Taddeo. FINRA states that between November 2021 and March 2022, he personally repaid those customers the amounts they had invested.

Those settlements, according to the regulator, were not disclosed to LPL, despite firm procedures requiring customer complaints to be escalated and prohibiting off-book resolutions. FINRA also alleges that Taddeo continued to attest on compliance questionnaires from 2021 through 2023 that he had not settled customer complaints away from the firm.FINRA concluded that this conduct violated FINRA Rule 3280, which governs private securities transactions, and FINRA Rule 2010, which requires brokers to observe high standards of commercial honor and just and equitable principles of trade.

In connection with these findings, FINRA imposed the following sanctions:

• Four-month suspension from associating with any FINRA member firm in all capacities
• $7,500 fine
• Statutory disqualification during the suspension period
• Waiver of any claim of inability to pay the monetary sanction

Why This Matters for Investors

Private securities transactions take place outside a firm’s supervisory and compliance framework. When investments are offered or facilitated without firm approval, investors lose important protections, including oversight of suitability, risk disclosures and conflict review.

FINRA’s allegations also highlight the risks associated with undisclosed complaint settlements. Firm procedures typically require customer complaints to be reported and reviewed so potential issues can be identified and addressed. When complaints are handled privately and not disclosed, firms may be unable to detect broader patterns of misconduct or take corrective action.

Finally, FINRA notes that repayment of losses does not eliminate regulatory concerns. Even when customers are made whole, the underlying conduct may still violate FINRA rules designed to promote transparency, supervision and accountability.

For investors, situations like this underscore the importance of understanding where an investment originated, whether it was approved by the firm and how complaints or disputes were handled if problems arose.

Talk to a Securities Attorney About Your Options

If you were introduced to an investment outside your brokerage account or later learned that a dispute was handled privately rather than through the firm, it may be worth reviewing how the situation was handled and whether required disclosures were made. Off-book transactions and undisclosed complaint settlements can leave investors without important supervisory protections.

Sonn Law Group represents investors nationwide in matters involving private securities transactions, disclosure failures and other forms of broker misconduct. We handle cases on a contingency-fee basis, meaning you pay nothing unless we recover compensation for you.

To request a confidential case review, call 833-912-3000 or complete our online consultation form.