In Re Claude G. Cossu, Debtor, Claude G. Cossu v. Jefferson Pilot Securities Corporation

Debtor Claude Cossu appeals the district court’s order affirming the bankruptcy court’s determination that Jefferson Pilot Securities (“Jefferson Pilot”) had a valid bankruptcy claim against Cossu of approximately $1.1 million and that such debt was nondischargeable pursuant to 11 U.S.C. § 523 (a)(2)(A). We affirm in part, reverse in part, and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

Cossu began working in the insurance business in 1971. In connection with this work, Cossu was a National Association of Securities Dealers (“NASD”) registered broker. As a NASD broker/dealer, Cossu knew he had an ongoing obligation to report outside business activities to the company with whom he was licensed (referred to in the industry as “selling away”).

In 1995, he became a registered representative for Jefferson Pilot. In response to a questionnaire completed at the beginning of his employment, he specifically denied being engaged in any such outside activities. Cossu was also aware that under NASD guidelines, he was not permitted to engage in private securities transactions without prior notice and approval from Jefferson Pilot.

In May 1997, Cossu received a fax from…