Selling Away

Conrad Bautista Barred From Financial Industry for Alleged Private Placements Sales

September 23, 2013 | by Staff Attorney

Conrad Tambalo Bautista (Bautista) resolved charges brought by the Financial Industry Regulatory Authority (FINRA) concerning the sale of private securities and possible involvement in a fraudulent investment scheme by accepting a bar from the securities industry.

Bautista has been associated with seven FINRA member firms including his most recent employer, CUSO Financial Services, L.P. (CUSO) from January 2010 to March 2013. Prior to CUSO, Bautista was associated with SWBC Investment Services, LLC, Financial Network Investment Corporation, and Wells Fargo Investments, LLC. Bautista obtained Series 6, 7, and 63 securities licenses.

Bautista’s public records do not disclose any businesses, other than CUSO, that Bautista was involved in. However, in February 2013, a customer allegedly filed a complaint against Bautista involving potential securities related misconduct. Subsequently, FINRA sent Bautista requests for information concerning the substance of the customer complaint. The FINRA letter sought information into whether Bautista may have engaged in fraudulent investment schemes. In addition, FINRA had information that suggested that Bautista may have been involved in undisclosed outside business activities and private securities transactions that may have involved borrowing money from customers.

Adam Gana is Quoted in the Wall Street Journal Reuters After having Received $2.8 Million Award

September 16, 2013 | by Staff Attorney

The Wall Street Journal and Reuters quoted managing partner, Adam J. Gana after he received a $2.8 Million award in Jacobs v. Van Zandt, FINRA Case No. 12-00156. Seven claimants alleged that Robert Van Zandt orchestrated a $35 million ponzi scheme leading to Mr. Van Zandt’s criminal indictment by the New York Attorney General. Mr. Gana was pleased with the victory and the outcome for the claimants. “These are hard working people from the Bronx who did not deserve to be defrauded by Mr. Van Zandt. This type of fraud is rampant in the securities industry and it is up to the regulators and the attorneys to weed it out and bring these people to justice.”

Centaurus Financial, Inc Broker Ralph Saviano Barred From Securities Industry

September 15, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has barred Ralph Saviano (Saviano) from the securities industry after the broker failed to respond to FINRA’s requests for information and an interview concerning unreported tax liens, a civil judgment, and a customer complaint involving the misuse of funds.

During a routine investigation of Centaurus, FINRA discovered information regarding certain undisclosed liens, judgments, and possible customer loans. Thereafter, in June 2012, Centaurus filed a regulatory tip disclosing that a customer had provided Saviano with a cashier’s check for approximately $66,000 that was made payable to Saviano. Saviano’s transactions with the customer concerned a possible misuse or conversion of funds.

Saviano has been associated with several brokerage firms in the past decade. Until 2004 Saviano was a registered representative of Royal Alliance Associates, Inc. From April 2004 until December 2006, Saviano was associated with USAllianz Securities, Inc. Thereafter, from December 2006 until July 2007, Saviano was a registered representative of Questar Capital Corporation. Finally, Saviano was registered with Centaurus Financial, Inc. (Centaurus) until his termination in June 2012. According to Saviano’s FINRA disclosure records he is also the president of Saviano Financial Group.

David Mura Accused of Selling Unregistered Securities and Churning

September 9, 2013 | by Staff Attorney

David Mura was recently barred by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) over allegations concerning the sale of unregistered securities away from his associated brokerage firm.

From September 2002 through April 2011, Mura was a registered representative and branch office manager with J.P. Turner & Co., LLC (J.P. Turner), a broker-dealer headquartered in Atlanta, Georgia. Thereafter, Mura was associated with Aegis Capital Corp. from April 2011 until October 2012. According to the SEC, from mid-2007 through 2012, Mura led a team of individuals that managed several limited liability companies (LLCs) including Charge-On Demand LLC (COD), Innovations Group Enterprises LLC (IGE), and Stucco LLC and directed and participated an effort to solicit investors in the sale of unregistered promissory notes issued by the LLCs (LLC Promissory Notes).

According to the SEC’s order, Rising Storm Technologies LLC (“Rising Storm”) was created 2006 to pursue various business ideas. Mura invested in Rising Storm in 2008 and caused the LLCs to take over Rising Storm’s business. Edward Tackaberry (Tackaberry), a resident of Fairport, New York was allegedly employed by Mura as a product salesman. Tackaberry had been previously barred from associating with any broker or dealer based on a September 2007 case brought by the SEC accusing Tackaberry of securities fraud.

Turker Ergun Barred From Financial Industry for Alleged Misappropriation of Customer Funds

September 5, 2013 | by Staff Attorney

Turker Ergun (Ergun) settled charges brought by the Financial Industry Regulatory Authority (FINRA) concerning the sale of private securities and misappropriating customer funds by accepting a bar from the securities industry.

From January 2004 until December 2008, Ergun was associated with WaMu Investments, Inc. From December 2008 through October 2009, Ergun was associated with Banc of America Investment Services, Inc. After Banc of America, Ergun was associated with Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) until September 2012.

Ergun’s public records do not disclose any businesses, other than his previous brokerage employers, that he was involved with. However, in August 2012, Merrill Lynch filed a U-5 termination form reporting that Ergun was discharged following an internal review concerning conduct involving recommending a customer’s purchase of securities not offered by the Merrill Lynch and accepting personal loans from a customer without firm approval.

Michael Kmetz Barred From Financial Industry for Alleged Private Securities Sales

September 5, 2013 | by Staff Attorney

Michael J. Kmetz (Kmetz) was barred by the Financial Industry Regulatory Authority (FINRA) over allegations concerning the sale of securities away from his member firm involving an elderly customer by accepting a bar from the securities industry.

On February 15, 2013, FINRA sent a letter to Kmetz requesting that he appear for testimony in connection with a complaint from an elderly investor who alleged that Kemtz had engaged in a variety of business activities and transactions. The customer’s complaint alleges that Kemtz sold securities away from Park Avenue. On March 12, 2013, Kemtz advised FINRA that he would not cooperate with the regulator’s requests for documents or testimony. Consequently, Kemtz was barred from the securities industry.

The accusations made against Kemtz are consistent with a “selling away” violation. Selling away occurs when a securities broker solicits securities that are not approved by the broker’s affiliated firm. Selling away is prohibited under FINRA Rule 3040, as well as other securities laws. The most common securities products solicited in selling away schemes are private placements and promissory notes.

Jason T. Knapp Accused of Selling Away Violations

September 4, 2013 | by Staff Attorney

At least one action has been initiated against Jason T. Knapp (Knapp) accusing the broker of running a Ponzi scheme. Knapp is a former broker of Dawson James Securities, Inc. (Dawson James) and operated under the company name Steeple Chase Group, LLC (Steeple Chase). Steeple Chase holds itself out as a real estate, financial lending, consulting, and investment related company.

From 2006 through September 2008 Knapp was a registered representative of Chicago Investment Group, LLC. From September 2008 through June 2012 Knapp was registered with Dawson James. Dawson James terminated Knapp citing that Knapp had falsified documents and solicited clients to purchase investments, presumably in Steeple Chase, that were not approved by the firm. In addition, an allegation was made by another client that Knapp engaged in an unauthorized transaction that Knapp could not provide the firm with a satisfactory explanation for.

In total two customer actions have been initiated against Knapp and Dawson James Securities for failing to supervise Knapp’s business activities. In March 2013, FINRA barred Knapp from the securities industry when he failed to respond to the agency’s request for additional information concerning the customer complaints and the circumstances of his termination.

Gana LLP Investigates Silver Oak Leasing and Alberto Neira

September 4, 2013 | by Staff Attorney

Gana Weinstein LLP is investigating claims against LPL Financial (LPL) on behalf of former customers of Alberto Neira who invested in Silver Oak Leasing (Silver Oak). In November 2012, Neira executed a letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA) concerning his sale of investments in Silver Oak. According to the AWC, “[b]eginning in 2006, [Neira] became engaged with an outside business activity at Silver Oak Leasing, Inc. (“Silver Oak”), a California corporation purportedly involved in providing automobile financing and leasing services. [Neira] failed to fully disclose his involvement in the outside business activity, including that he was acting as a director of Silver Oak. [Neira] thereby violated NASD Rules 3030 and 2110 and FINRA Rules 32701 and 2010. Between July 1, 2008, and January 18, 2011 (the relevant period), [Neira] also recommended investments in Silver Oak to 14 customers. He did so without disclosure to his firm, [LPL Financial,] in violation of NASD Rules 3040 and 2110 and FINRA Rule 2010.2. Finally, during the course of this investigation, [Neira] failed to timely respond to staff requests for information and testimony. As a result, [Neira] violated FINRA Rules 8210 and 2010.” Neira was barred from the securities industry.

From February 2002 through January 2011, Neira was registered with LPL and operated out of Santa Ana, California. Under FINRA Rule 3010, LPL was obligated to properly supervise the activities of Neira during the time he was registered with the brokerage firm. Accordingly, we believe LPL may be liable for failing to supervise Neira’s activities while registered at the firm, and that it could be held responsible for compensating customers of Neira for their losses.

Former customers of Neira who invested in Silver Oak are encouraged to contact Gana Weinstein LLP to explore their legal rights and options.

FINRA Finds George Kardaras and Brian Borakowski Sell Echo Canyon, LLC Away From Their Brokerage Firms

August 30, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently entered a default decision against George Alexander Kardaras (Kardaras) and Brian Matt Borakowski (Borakowski) after having alleged that the two brokers perpetrated a Ponzi scheme. FINRA found that the two solicited at least 12 customers over four years to invest more than $665,000 in total in Echo Canyon promissory notes. The notes bore interest rates between 14 to 56 percent and had quarterly, semiannual, and annual maturity dates.

Kardas’ and Borakowski’s scheme involved soliciting customers to purchase promissory notes in Echo Canyon LLC, a limited liability company in Arizona. Kardas and Borakowski told investors that their investment would be used to purchase used vehicles in U.S. auto auctions and shipped to Russia for re-sale. FINRA determined that Kardaras and Borakowski never intended to use the customer funds as represented. Instead, only two automobiles for EchoCanyon in or around late 2007 or early 2008 were actually purchased.

FINRA found that 95 percent of the funds raised, approximately $634,000 were used by the two brokers in order to pay personal expenses, to cover expenses at their employer firms’ branch office businesses, and to make payments to earlier investors in furtherance of the Ponzi scheme.

FINRA Files Complaint Against David Mickelson Over Private Placement Sales

August 24, 2013 | by Staff Attorney

David Mickelson has been accused by the Financial Industry Regulatory Authority (FINRA) of improperly selling approximately $8.3 million worth of various private placements to at least 71 customers without informing his brokerage firm (a practice known as “selling away“).

From 2004 through May 2011, Mickelson was associated with NFP Securities, Inc. (NFP). Mickelson’s private placement sales during this time included investments in Micro Pipe Fund I, LLC (Micro Pipe Fund), The Nutmeg Fund/Michael Fund LLLP, The Nutmeg/Fortuna Fund, LP, the Nutmeg/Patriot Fund, LLLP, and Lone Wolf, Inc. FINRA alleged that Mickelson created Micro Pipe Capital Management, LLC, Mickelson Investment Management, LLC, Hannahlu Ventures, LP, and DFM Agency, LLC in order to manage the various private placement offerings.

In order to promote his private placements, Mickelson allegedly marketed Micro Pipe Fund and other investments using misleading websites and advertisements communicated to customers using email accounts not monitored by NFP. Mickelson’s websites included: mickelsoninvestmentmanagement.com/mickinvest.com; astuteasset.com; and mickelsonlife.com. These websites contained securities-related communications including detailed discussions of private investment in public equity (PIPE) funds.