Gana LLP Files Complaint On Behalf of Customer Alleging Broker Erryn Barkett Sold Unapproved Securities to Clients

shutterstock_93851422-300x240The securities fraud attorneys at Gana Weinstein LLP have recently filed a complaint with The Financial Industry Regulatory Authority (FINRA) on behalf of clients alleging that Erryn Barkett (Barkett) engaged in securities fraud by selling unapproved investments and inappropriate and costly alternative investments and private placements to the clients.  The claim was brought against brokerage firm Next Financial Group, Inc.  (Next Financial) alleging that the firm failed to supervise Barkett’s misconduct.  Barkett is currently associated with LPL Financial LLC (LPL).

According to Barkett’s brokercheck records Barkett has been subject to one regulatory complaint, four customer complaints, and has six financial disclosures.  The regulatory complaint involves allegations that Barkett solicited multiple investors to invest in an unapproved security called Voyager Financial Group, LLC.

Barkett has disclosed at least 11 outside business activities.  These activities include Barkett’s d/b/a Barkett Allen Capital LLC.  In addition, Barkett disclosed his involvement with SkyPix, LLC, BAS, LLC, Flagship Properties, LLC, Sunnyside Ranch, LLC, Produce Insight Panel, and Wheelman, LLC.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.  In this case the claimants alleged that Barkett solicited them to invest in several business ventures including SkyPix and a land deal.

In addition, the claimants allege that many of Barkett’s recommendations were to invest in high cost direct participation products (DPPs) such as non-traded real estate investment trusts (REITs) and other alternative investments.  All of these investments come with high costs and have historically underperformed even safe benchmarks, like U.S. treasury bonds.  For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed at all.  However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them and have created a large market for a failed product.  Further, investor often fail to understand that they have lost money in these illiquid investments until many years after investing.  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.

Barkett entered the securities industry in 2000.  From March 2008 through January 2013 Barkett was associated with Next Financial.  Thereafter, from January 2013 onward Barkett has been registered with LPL out of the firm’s Fincastle, Virginia and The Woodlands, Texas office locations.

The investment fraud attorneys at Gana Weinstein LLP have represented hundreds of investors in securities related disputes including in cases of selling away and brokerage firms failure to supervise their representatives.  Our consultations are free of charge and the firm is only compensated if you recover.