Securities Lawyers Blog
The law offices of Gana Weinstein LLP are pleased to announce that a group of 23 claimants have been awarded $3 million by a FINRA arbitration panel after 18 days of hearing and litigation that stretched over three years. The case involved important investor protections concerning broker private securities transactions and outside business activities that firms must supervise and has been picked up by news outlets.
At hearing the evidence showed that Spire Securities, LLC (Spire Securities) and the firm’s principal officers including its CEO David Blisk (Blisk) and CCO Suzanne McKeown (McKeown) failed to supervise their registered representative Patrick Churchville (Churchville). Due to the firm’s non-existent supervision Churchville was able to unsuitably invest his clients in his own private equity funds and misappropriate client funds. Chuchville was later barred from the securities industry and in March of 2017 the United States District Court of Rhode Island sentenced Churchville to 84 months in federal prison for his crimes.
Churchville conducted his fraudulent activities through private equity funds he ran and controlled through a disclosed outside business activity and registered investment advisory practice. Claimants showed that the private equity securities were private securities transactions that the firm was required to supervise. Claimants proved that while Blisk and McKeown approved of Churchville’s activities but that the firm relied on Churchville to supervise himself.
Astonishingly, it was not until over a year after approving Chuchville to sell the private equity funds did Respondents seek a copy of the private placement memorandum for the fund – which did not exist. Claimants provided numerous examples of Respondents failure to supervise including the fact that Spire Securities had none of Claimants advisory agreements, subscription agreements, or account statements. Respondents also had no idea what investments Churchville was making in his private equity fund while at the same time allowing him to obtain custody of client funds in bank accounts he alone had access to. Finally, the panel was presented with evidence of numerous correspondence evidencing Churchville’s fraudulent dealings that went unreviewed by the firm.
“Allowing a broker to commingle client funds in bank accounts the broker alone controls is a recipe for disaster” said Adam Weinstein, a partner with Gana Weinstein who tried the case. “We challenged Spire Securities to produce any documentation of review of client accounts or due diligence on Churchville’s funds to no avail throughout the entire hearing” he added. The private securities transaction and outside business activity rules provide key investor protections that prevent brokers from running fraudulent investment related side jobs.
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.