Securities Lawyers Blog
Broker Mary A. Faher (Faher) was suspended and fined by The Financial Industry Regulatory Authority (FINRA) over allegations that Faher made unsuitable recommendations to her clients to invest in private placements.
Between February 2011, and November 2012, Faher was registered with WR Rice Financial Services, Inc. (WR Rice). Previously, Faher was registered with Fifth Third Securities, Inc. from March 2004 through February 2011. According to Faher’s BrokerCheck, on September 26, 2013, the state of Michigan permanently barred Faher from registration in Michigan and fined her $4,000 in connection with the sales of limited partnership securities.
FINRA alleged that between August 2011, and February 2012, Faher recommended that her customers invest in various limited partnership interests resulting in an overconcentration in the customer’s accounts in speculative securities. The limited partnerships were interests in The Diversified Group Land Contract Limited Partnerships 1-17 (Diversified LPs) that were offered by The Diversified Group Partnership Management, LLC (Diversified Group). The Diversified Group was a contracting company that purchased and rehabilitated real estate. The Diversified LP shares stated purpose was to use investor funds to purchase servicing land contracts on residential real estate. The land contracts promised investors an annual interest rate of 9.9%, with a total return of 10.44%. The Diversified Group planned to collect payments on the land contracts from the homes’ inhabitants and pay investors. The offering memoranda for the Diversified LPs stated that the investments were speculative in nature, illiquid, non-transferable, subject to default risk, and adverse market conditions.
FINRA alleged that from April 2011 through at least September 2012, WR Rice sold interests in unregistered private placement offerings issued by 17 entities of the Diversified Group. Joel Wilson (Wilson) was the general partner of Diversified Group and controlled the company. Wilson also served as WR Rice’s President and Executive Principal, Chief Compliance Officer, and CEO until he relinquished those positions on or about October 15, 2012.
FINRA found that from at least August 2011 through February 2012, Faher recommended and, sold membership interests in Diversified LPs 2, 4, 5, 7, 8, 9, 10, 11, 12, 13, and 14 to WR Rice customers who were retired or who had limited financial means. FINRA alleged that one couple was 66 and 64 year-old retired persons with income of approximately $37,000 and a liquid net worth of $120,000. The couple’s investment objectives were growth and they had a moderate risk tolerance. Neither of them had experience investing in private placements before. According to FINRA, the couple invested $95,000 in Diversified LPs 2 and 4 representing approximately 79% of their liquid net worth.
FINRA found that five other customers were similarly recommended concentrations of between 30% and 100% of their liquid net worth in the Diversified LPs. FINRA concluded that these concentrated positions in Diversified LPs were unsuitable for the customers because they exposed Faher’s customers to a level of risk of loss and speculation that was unsuitable given the level of concentration in Diversified LPs in their accounts.
The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning the unsuitable sales of private placements securities. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.