Ex-Merrill Broker Suspended over Undisclosed “Esports” Gaming Business
The Financial Industry Regulatory Authority has sidelined a former Merrill Lynch broker for nearly two years for purchasing a video sports gaming league alongside a client, without permission from the firm.
The activities spanned five years ending last June, and violated Finra Rules 3270 and 3280 requiring brokers to provide written notice of outside business activities and private securities transactions to their firms, according to a consent letter the regulator accepted on Tuesday.
Roumayeh, who accepted the sanctions without admitting or denying the findings, spent the last 10 years of his 17-year career with Merrill Lynch and resigned last July while under internal review, the letter said.
He is currently registered with the Securities and Exchange Commission as an investment adviser with Capital Asset Advisory Services, a $2.2 billion-asset firm in Haslett, Michigan, and could not be reached for comment. The Finra suspension does not affect his RIA registration.
Brokers have frequently stumbled over outside business activity rules, which Finra has attempted to clarify even as it reinforces concerns about the need for disclosure so firms can monitor potential financial implications that could influence employees’ sales practices.
The Roumayeh sanctions are relatively strong. In January, Finra fined a 50-year brokerage veteran $7,500 and suspended him for 35 days for making an investment in an outside fund without approval. It issued a two-month suspension and $5,000 fine against a former LPL Financial broker in October for failing to disclose to the firm his planned involvement in a nutritional supplements business.
Roumayeh and his Merrill client purchased the esport franchise in September 2016, and in March 2019 formed a holding company to facilitate a $5.5 million investment from an outside publicly traded company that bought preferred stock in the business, according to the consent letter. The outside investor, which was not a Merrill customer, made Roumayeh CEO and day-to-day manager of the business, it said.
Roumayeh was publicly identified with the business in at least one press release in December that identified him as co-owner of Renegades, a “professional esports team.” An online publication on sports gambling in March identified his partner as Jonas Jerebko, a former NBA player who spent the majority of his career with the Detroit Pistons.
The publication also identified the outside investor as Beasley Broadcast Group Inc., a Naples, Florida-based radio station operator, and said that most Renegades employees have recently exited the venture over concerns about mismanagement.
The Finra consent letter said Roumayeh knew that he was required by Merrill to request and receive written approval for outside business activities because he had previously disclosed one to the firm. Roumayeh also attempted to conceal his relationship with the entities by forming them under his wife’s name and naming her as the sole authorized representative on bank accounts.
Under Finra’s sanction guidelines, advisors could be barred for life for outside business activity infractions.
“He made a mistake, and he he is happy to put it behind him and move forward,” said Roumayeh’s lawyer, Brandon M. Taaffe of Shumaker, Loop & Kendrick in Sarasota, Florida.
A Merrill spokesman declined to comment.