(Dow Jones) Lincoln Financial Advisors Corp. must pay more than $4.3 million to a group a 22 investors who accused a manager at the firm of "selling away," according to a securities arbitration ruling.

A Financial Industry Regulatory Authority panel wrote in a decision on September 27 that Lincoln Financial Advisors was "negligent in not preventing" a manager in its Salt Lake City, Utah office, from using an outside business to raise money from investors. Lincoln Financial Advisors, a unit of Lincoln National Corp. (LNC), had "ample opportunity" to prevent the conduct, which occurred for nearly a year, the panel wrote.

"Selling away" occurs when a broker solicits clients to buy securities that aren't offered by his or her firm, and doesn't obtain the firm's approval. Regulators typically view the practice as a violation of securities laws.

The brokerage manager, Scott B. Gordon of Utah, became the chief executive of Healthright, Inc., a software development company, in 2005, according to the ruling. He identified himself as Healthright's chairman and chief executive on emails from his Lincoln account, which also included Healthright's address and phone number.

Two Healthright investors sent a written complaint to Lincoln in 2006, according to the ruling. That's when the company allegedly first discovered the activity, says Mark Pugsley, a securities lawyer in Salt Lake City. "The fact that they didn't discover it within the first five minutes is the shocking part," says Pugsley. The manager, he says, ran Healthright from his office at Lincoln Financial.

Gordon submitted a request to Lincoln Financial to conduct an outside business activity, but it wasn't approved nor denied, according to the panel's decision. Gordon "ceased to be" Healthright's chief executive in May, 2006, according to the ruling. In June, 2006, Grant Gifford, a claimant in the case and Healthright investor, attended a board of directors meeting and discovered alleged misstatements and omissions made by Gordon, among other things, according to the ruling.

FINRA barred Gordon from the securities industry in 2008.

All the investors in the case were part of a limited partnership, Healthright Partners, LP, which was one of two claimants that filed the case under their names. Gifford, the second claimant, also loaned money to Healthright in his personal capacity, according to Pugsley.

A Lincoln Financial spokesman declined to comment.

Efforts to locate Scott B. Gordon were unsuccessful on Wednesday.

Investment News reported the ruling on Tuesday.

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