Previously financial advisor Ronald Bailey (Bailey), previously employed by brokerage firm Mutual of America Securities LLC has been subject to at least 5 disclosable events. These events include 4 customer complaints, one regulatory event. According to a BrokerCheck reports most of the recent customer complaints concern either corporate debt securities or alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.
FINRA BrokerCheck shows a final customer complaint on September 09, 2022.
Without admitting or denying the findings, Bailey consented to the sanctions and to the entry of findings that he participated in an undisclosed private securities transaction. The findings stated that Bailey entered into an investment marketing agreement with a limited liability company (LLC) to sell and market LLC membership interests in a seafood processing company and affiliate of the LLC, for compensation of up to a 0.5 percent membership interest in the LLC. In connection with these activities, Bailey distributed the LLC’s financial projections and other marketing materials to the potential investors and arranged investor meetings for the potential investors with the seafood processing company’s and the LLC’s management. Bailey solicited a customer at his member firm to invest $588,000 in an LLC membership interest in the seafood processing company and was given a 0.5 percent membership interest in the LLC as compensation for the successful solicitation. Bailey did not notify or receive prior written approval from his firm to participate in this private securities transaction. In addition, Bailey attested during an annual compliance interview that he had not solicited any persons to make any investments other than in products offered by or through the firm. The findings also stated that Bailey engaged in undisclosed and unapproved outside business activities (OBAs). Bailey introduced the LLC’s management to contacts who could provide it with transportation services. In an effort to market the company, Bailey also contacted an Alaskan official regarding the company’s expansion into China. Bailey did not disclose his OBAs with the LLC to the firm until one year later. Bailey also engaged in undisclosed and unapproved OBAs with a human resources consulting and payroll administration company. Bailey and two partners registered the company’s name and marketed the company to the public. Bailey submitted an OBA approval request too the firm to own and operate the company, but the firm denied the request. Despite the firm’s denial, Bailey continued his business activities with the company. The findings also included that Bailey did not submit any communications regarding investments in the seafood processing company to the firm for internal review prior to their distribution. In the course of soliciting potential investors, Bailey’s communications did not provide the key assumptions underlying the seafood processing facility’s yearly profit projections, and did not identify the key limitations, impediments and restrictions that could impede the achievement of the profit projections. The communications also did not disclose the risks of the investment, including the general risks associated with private placements that they are speculative in nature, illiquid, and the possibility of the entire loss of the investment. As a result, the communications did not provide the investor with the required sound basis to evaluate all the relevant facts with respect to the potential investment. Baily also emailed a prospective investor a communication from the LLC’s management and a financial statement that contained promissory, unwarranted, and misleading statements.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $588,000.00 on December 28, 2020.
Plaintiff alleges that in or about December 2017, after he declined to purchase New York Life investments, the RR promised a 10% dividend on an investment in a seafood company. The Plaintiff further alleged that the company became insolvent and he lost his initial investment. Plaintiff requests actual damages, attorney’s fees and treble damages.
FINRA BrokerCheck shows a settled customer complaint on September 29, 2020.
The customer alleged that the cash surrender feature of a variable universal life insurance policy issued on or about November 26, 2018 had been misrepresented.
FINRA BrokerCheck shows a settled customer complaint on February 18, 2020.
The customer alleged that several products recommended by the RR had been misrepresented. These products include two variable universal life insurance products issued on or about June 21, 2016 and four variable annuities issued on or about June 22, 2016, June 23, 2016, and July 24, 2017, and June 6, 2018.
FINRA BrokerCheck shows a settled customer complaint on February 18, 2020.
The customer alleged that several products recommended by the RR had been misrepresented. These products include two variable universal life insurance products issued on or about June 21, 2016 and four variable annuities issued on or about June 22, 2016, June 23, 2016, and July 24, 2017, and June 6, 2018.
Products under DDPs include non-traded REITs, oil and gas offerings, equipment leasing investments, and a range of other alternative financial instruments. Investors almost never benefit from these alternative investments, which are typically inappropriate because of their high fees and expense structure. The extra commissions paid to brokers for selling these inferior investments create misleading incentives, driving an artificial demand for the products.
Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds. Those selling these products must disclose to investors that non-traded REITs yield lower returns than treasuries and carry significant risk and illiquidity—yet they almost never comply. Given that investors are not rewarded with higher returns for assuming greater risk and illiquidity, such alternative investment products are rarely appropriate for them.
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client after conducting due diligence. Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors. Appropriate due diligence would identify that an alternative investment’s high costs, illiquidity, and conflicts of interests that would make the investment not suitable for investors. Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Unfortunately, these types of alternative investment products continue to popular among brokers due to their high commissions. In order to counter the perverse incentives to sell these flawed product many states now limit investors from investing more than 10% of their liquid assets in Non-Traded REITs and BDCs. Many states impose these limitations because these investments do not benefit investors.
Bailey has been in the securities industry for more than 5 years. Bailey has been registered as a Broker with Mutual of America Securities LLC since 2020.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.