The Financial Industry Regulatory Authority (FINRA) permanently barred broker Dennis Karasik (Karasik) concerning allegations that from December 2010, to March 2012, Karasik participated in private securities transactions, otherwise known as “selling away” without providing prior written notice to the two firms with which he was associated. Specifically, FINRA alleged that Karasik participated in the sale of bonds issued by Diversified Energy Group, Inc. (DEG), an energy company, and that the company paid him finder’s fees from on the sales made.
Karasik was employed by a number of brokerage firms from 1986 through February 2013. During the times relevant to FINRA’s allegations Karasik was registered with Multi-Financial Securities Corp. (Multi-Financial) until December 2011, and with H. Beck, Inc. (H. Beck) until February 2013. Karasik maintained an office in Parkton, Maryland. Karasik was terminated by H. Beck for the conduct alleged by FINRA. According to Karasik’s BrokerCheck, he has had six customer complaints filed against him and also has two tax liens. Karasik was also a partner of Carrio, Karasik, & Associates (CKA).
DEG is a Florida energy company that develops oil and gas reserves in the United States. It has raised funds through private placement offerings of corporate bonds to accredited investors. FINRA alleged that between January 2010, and March 2012, Karasik and his partner in CKA participated in the sale of more than $3.2 million of DEG bonds to at least 25 investors. According to FINRA, Karasik was compensated for his role in these sales through the payment of a finder’s fee.
NASD Rule 3040 requires an associated person to provide his or her employer with written notice of private securities transactions before the representative participates in those transactions. FINRA found that Karasik failed to disclose his participation in the sales of DEG bonds to either Multi-Financial or H. Beck. In addition, FINRA found that Karasik falsely answered ”No” on Multi-Financial Securities Annual Business Questionnaire to the question whether he had engaged in private securities transactions. FINRA also alleged that Karasik did not provide accurate information to H. Beck regarding CKA because he stated that the company was not investment related. However, in fact, FINRA found that CKA provided various investment-related services.
In October 2012, according to FINRA, a lawsuit was filed against Karasik by three customers who had purchased DEG bonds on Karasik’s recommendation. The customers alleged that Karasik made unsuitable recommendations of DEG. H. Beck sent Karasik a draft Form U4 amendment to disclose the lawsuit and asked Karasik for comments to include in the filing. FINRA found that Karasik falsely stating that he “did not make the recommendation nor was I compensated.” FINRA found Karasik’s response to be false as Karasik had recommended the purchase of the bonds and had been paid a finder’s fee.
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