Broker Harry Hammond (Hammond) has been suspended by the Financial Industry Regulatory Authority (FINRA) concerning allegations that between April 3, 2006, and November 30, 2007, Hammond participated in private securities transactions without InterSecurities, Inc. (ISI), now known as Transamerica Financial Advisors, Inc. (Transamerica) approval. FINRA alleged that Hammond referred 24 individuals and entities to invest with the Nutmeg Group, LLC, (Netmeg) a private investment firm which purportedly specialized in Private Investment in Public Equity (PIPE) transactions.
FINRA alleged that Hammond solicited potential investors by reporting his own success as an investor with Nutmeg, distributed information from Nutmeg, and referred interested customers. In total, FINRA found that individuals referred by Hammond invested over $4 million in the fund. On March 23, 2009, the SEC brought action against Nutmeg for misappropriation of client assets, misrepresentations to investors, and failure to maintain required books and records. The fund was placed in receivership on August 6, 2009. FINRA alleged that Hammond’s actions, by participating in private securities transactions without notice and approval from Transamerica, violated FINRA rules.
Hammond was associated with ISI, now known as Transamerica between February 22, 2006, and November 30, 2007. Hammond was terminated by Transamerica on November 30, 2007, for failure to follow its advertising policies. Hammond subsequently was associated with Allegiant Securities, LLC from December 2007, until December 2011. Hammond’s BrokerCheck reveals that Hammond is also an employee of or involved with Hammond Asset Management LLC and Hammond Financial Group, LLC. Hammond has had eight customer disputes filed against. The majority of these disputes involve allegations that Hammond misrepresented investments in either the Nutmeg Funds, Adams Fund LLP, Fortuna Funds, LLC, or Black Diamond Fund and that the investment recommendation was unsuitable for the client.
Nutmeg was a private investment firm that purportedly invested in small companies through PIPE transactions. FINRA alleged that the director of sales and marketing for Nutmeg told Hammond that he had received over 100% returns from his Nutmeg investment. On or about April 4, 2006, Hammond invested $100,000 in Nutmeg and submitted an Outside Business Activity request to ISI to approve his personal investment in Nutmeg.
On October 31, 2006, Hammond submitted a request to form a general partnership to ISI in order to raise capital for Nutmeg. FINRA found that on July 18, 2007, approximately nine months later, ISI denied Hammond’s request and explicitly prohibited Hammond from participating in the activity described. Despite ISI’s denial of Hammond’s request, FINRA determined that Hammond recommended investments in Nutmeg both before and after ISI’s denial of Hammond’s request. FINRA found that in one instance, Hammond sent a letter to a client on ISI stationary enclosing a “PIPE Fund Q&A” that boasted a 201% internal rate of return for Nutmeg’s investments. 24 individuals and entities referred by Hammond invested over $4 million with Nutmeg.
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