The Financial Industry Regulatory Authority (FINRA) has barred broker Richard Manchester (Manchester) over allegations that his participation in several private placements caused his employing firm to fail to establish an escrow account for several contingency offerings, broke escrow before the minimum contingency amounts were met, and made unauthorized use of offering proceeds by lending offering proceeds to other private placements. FINRA found that Manchester’s acts violated of Section 10(b) of Securities Exchange Act of 1934 and Rules 10b-5 and 10b-9 thereunder, NASD Rule 2110, and FINRA Rules 2020 and 2010.
From July 2004 through December 2010, Manchester was associated with Girard Securities, Inc. (Girard Securities). During this time Manchester was involved in the offering of several private placement offerings. One offering was Pacific Yogurt Partners, LLC (Pacific Yogurt) a limited liability corporation formed in 2007 to acquire franchise rights from Golden Spoon Frozen Yogurt. The Pacific Yogurt private placement offered Series B and Series C Units in a contingency offering requiring the raising of a minimum amount of funds for the offering to proceed. FINRA alleged that even though the private placement memorandum stated that funds received would be returned to investors if the minimum sales contingency was not met the funds were released to the issuer. In addition, under the securities laws investor funds received before the satisfaction of the minimum sales contingencies were required to be deposited into a bank escrow account. Instead, FINRA found that the funds provided directly to Pacific Yogurt, the issuer. FINRA alleged that Manchester’s conduct constituted a willful violation of Rule 10b-9, and a violation of NASD Rule 2110 and FINRA Rule 2010.
Another private placement Manchester was involved in offering was WaveWise, LLC (WaveWise). WaveWise was created to acquire interest in IdeaEdge, Inc. (IdeaEdge). The offering sought to purchase up to 2,625,000 shares of IdeaEdge common stock, at $0.80 per share, with warrants to purchase a share of common stock at $1.00 per share for every four shares of common stock purchased at $.80 per share. Thereafter, IdeaEdge changed its name to Social Wise, Inc. (Social Wise), which subsequently changed to Bill My Parents. Like Pacific Yogurt, FINRA alleged that investor funds received before the satisfaction of the minimum sales contingency were required to be deposited into a bank escrow but instead were deposited into a bank account in the name of WaveWise.
Finally, FINRA alleged that Manchester caused the offering documents of several private placements to be false and misleading. Brenham Dome General Partnership (Brenham Dome) was an oil and gas partnership. Wave Energy Partners, LLC (Wave Energy), an entity controlled by Manchester, was the managing partner of Brenham Dome. Girard Securities acted as the placement agent for the offering. According to FINRA, From May 2010 through August 2010, Manchester caused Brenham Dome, an oil and gas drilling company, to lend $85,000 to Pacific Yogurt, a company that acquired and operated a frozen yogurt franchises. FINRA found that Pacific Yogurt has not fully repaid the loan.
FINRA also alleged that on or about December 31, 2009, and August 5, 2010, Manchester caused Brenham Dome to make two loans to Wave Energy for a total of $131,250. Brenham Dome offering materials provided to investors represented that the investment funds would be used in the operation of its oil and gas business. FINRA found that Brenham Dome’s offering materials did not provide or suggest that invested funds could be used to make loans to entities in which the managing general partner had an interest. In addition, FINRA alleged that Manchester failed to obtain investors’ consents to deviate from the statements made in the offering materials and make loans to other companies.
Manchester’s public disclosures list that he is also employed by or involved with the following entities: Wave Wealth Management, LLC, LB Energy Partners, LLC, Kings Bayou Bridge Note, Drink Ole, LLC, South Longhorn GP, Gulf Coast Investors, LLC, South Bourg Partners, LLC, Innovative Marketing Concepts, and Kinsley Resources. Several complaints have been filed against Manchester alleging fraud, negligent misrepresentation, unsuitable recommendations, breach of fiduciary duty, and unfair business practices in connection with the sale of various private placements.
The attorneys at Gana LLP are experienced in investigating claims involving private placements. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.