FINRA Files Complaint Against Gopi Vungarala and Purshe Kaplan Sterling Over Fraudulent Commission Charges

shutterstock_20354398The securities lawyers of Gana Weinstein LLP are investigating a complaint filed by The Financial Industry Regulatory Authority (FINRA) against broker Gopi Krishna Vungarala (Vungarala) and his brokerage firm Purshe Kaplan Sterling Investments (Purshe Kaplan). FINRA alleged that from at least June 2011 through January 2015, Vungarala regularly lied to his customer who is a Native American tribe regarding commissions paid to the broker and firm on non-traded real estate investment trusts (Non-Traded REITs) and business development companies (BDCs).

Vungarala served the tribe as both a financial advisor and was employed by the tribe as its Treasury Investment Manager and participated in decisions regarding the tribe’s investments. According to FINRA, Vungarala knew that the tribe prohibited employees such as Vungarala from engaging in business activities that could constitute a conflict of interest with the tribe. In order to induce the tribe to make purchases in Non-Traded REITs and BDCs in light of the prohibition against conflicts of interests Vungarala falsely represented to the tribe that he would not receive any commissions on the purchases. Despite the prohibition and the representations, FINRA alleged that Vungarala fraudulently induced the tribe to invest $190 million of dollars in Non-Traded REITs and BDCs without revealing that he and his firm received commissions on the sales at a typical rate of 7% generating $11.4 million in commissions for Purshe Kaplan of which $9.6 million was paid to Vungarala.

Worse still, FINRA alleged that the tribe was eligible to receive volume discounts on the products purchased but instead paid full commission. FINRA alleged that Purshe Kaplan’s supervisory failures led to the volume discounts not being applied. FINRA alleged that the tribe failed to receive more than $3.3 million in volume discounts and that these funds funds were instead paid to Purshe Kaplan and Vungarala in the form of commissions.

FINRA went on to alleged that in December 2014, the tribal council through its attorney contacted Purshe Kaplan to ask the firm whether Vungarala was receiving commissions on the Non-Traded REITs and BDCs purchases. Thereafter, the tribe contacted the Chief Operating Officer and Director of Supervision at Purshe Kaplan to request that Purshe Kaplan provide him with information regarding Vungarala’s commissions received on the tribes transactions. According to FINRA Purshe Kaplan failed to respond to their own client’s request to learn what commissions had been charged and nobody at Purshe Kaplan has ever acknowledged that Vungarala received commissions from his sales of REITs and BDCs.

The investment fraud attorneys at Gana Weinstein LLP have experience representing investors and institutions that have had their accounts mishandled by the financial advisors they have trusted to manage their accounts. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.

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