Articles Tagged with private placement fraud attorney

shutterstock_150746-300x199According to BrokerCheck records Ross Sinclaire & Associates, LLC (Ross Sinclaire) has been subject to a regulatory action over, among other things, the firm’s sales practices with respect to several private placement offerings.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Ross Sinclaire has been accused by FINRA of failing to disclose material information to investors in relation to several offerings offerings.

FINRA alleged that in March and April 2014, Ross Sinclaire was the exclusive placement agent for a private placement of notes and was involved in the preparation and circulation of a Confidential Information Memorandum (CIM) to seven accredited investors for notes.  The proceeds were to provide to a film production company for the advance funding of anticipated state tax credits.  The CIM disclosed that in addition to a 2% commission, Ross Sinclaire would also earn a “certain percentage” of profits on the sale of tax credits but failed to disclose that it would earn half of those profits.  FINRA found that this information was a material fact that would have been important to investors.  FINRA also found that the CIM also failed to disclose that one of Ross Sinclaire’s registered representatives was Vice President or the issuer.

In another offering, FINRA alleged that between December 2015 and December 2016, Ross Sinclaire omitted material facts from the Private Placement Memorandum (PPM) for municipal bonds underwritten by the Firm to finance the construction of a community recreation center. FINRA found that Ross Sinclaire failed to disclose in the PPM: (i) that the issuer had threatened to default on an earlier series of bonds and bond anticipation notes (BANs); (ii) that a loan agreement existed between the issuer and Ross Sinclaire: and (iii) information about the finances of both the issuer and Ross Sinclaire.  FINRA determined that this information should have been included in the PPM as it would have been material to investors in deciding whether to invest in the bonds.

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shutterstock_103681238-300x300At Gana Weinstein LLP, we often hear from investors who were recommended by their advisors to purchase high risk private placement investments and suffered substantial – often crushing losses as a result.  Our firm regularly represents these investors in disputes with the advisors and brokers who sold these products without adequate disclosure.  Brokers have a responsibility to conduct due diligence on all private placement offerings.  Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors.

Private placements are bond, equity, or other debt instruments issued in reliance on a statutory or rule-based exemption from the registration requirements administered by the (SEC).  The private placement industry was created based upon the reasoning that exempting private placements from registration is appropriate where purchasers have the economic ability, sophistication, and the professional advice necessary to do without the regular protection afforded by the disclosures required through registration.  According to sources, a total of $33.5 billion was raised in 647 transactions through the third quarter of 2018.

Recently FINRA put out an announcement that called out the shortcomings it observed in the industry when it comes to due diligence. FINRA found that firms “failed to conduct reasonable diligence on private placements and failed to meet their supervisory requirements.”  FINRA stated that firms that performed “reasonable diligence conducted meaningful, independent research on material aspects of the offering; identified any red flags with the offering or the issuer; and addressed and resolved concerns that would be relevant to a potential investor.”  Firms should have a due diligence process such as “creating a due diligence committee (at larger firms) or otherwise formally designating one or more qualified persons (at smaller firms), and charging them with investigating and determining whether to approve the offering for sale to investors.”  The crucial ingredient is for “firms independently verified information that was key to the performance of the offering…”

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shutterstock_132704474-300x200According to BrokerCheck records financial advisor Andrew Burdsall (Burdsall), currently employed by Securities America, Inc. (Securities America) has been subject to at least five customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Burdsall’s customer complaints allege that Burdsall invested them in a fraudulent private placement security or made unsuitable investments.

In January 2019 a customer filed a complaint alleging that Burdsall violated the securities laws including that after briefly discussing the possibility of generating a monthly income plan, Burdsall placed unauthorized trades within the client’s account which resulted in a loss to his portfolio.  The customer alleges $106,202.16 in damages.  The claim is currently pending.

There are also four claims against Burdsall concerning the sale of fraudulent private placements including Provident Shale and Medical Capital.

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shutterstock_184920014-300x199According to BrokerCheck records financial advisor Kevin Wilson (Wilson), currently employed by National Securities Corporation (National Securities) has been subject to at least four customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Wilson’s customer complaints allege that Wilson committed violations of the securities laws with respect to the sale of predominately private placement securities.  These private placement sales occurred while Wilson was employed by Laidlaw & Company (UK) Ltd. (Laidlaw).

The securities lawyers of Gana Weinstein LLP recently filed a complaint on behalf of a client alleging that Laidlaw & Company (UK) Ltd. (Laidlaw) recommended the investor purchase a micro cap stock underwritten by the firm in violation of the securities laws.  According to newsources and public filings Laidlaw and its brokers have been involved in the fraudulent promotion of small and micro cap stocks to their clients in violation of their duties to their clients to disclose conflicts of interests.

Recently, one of Laidlaw’s clients, Barry Hoing (Hoing), was charged by The Securities and Exchange Commission (SEC) for generating $27 million through a “classic pump-and-dump scheme.” The SEC’s allegations focus on stocks including BioZone Pharmaceuticals (now Cocrystal Pharma) (COCP), MGT Capital (OTC: MGTI), and MabVax Therapeutics (OTC: MBVX).   However, other public filings reveal Hoing was also involved in other stocks including Riot Blockchain (RIOT), PolarityTE (PTE formerly COOL), and Marathon Patent Group (MARA).  In addition, Laidlaw was involved in other private placement securities offerings including Aethlon Medical, Actinium, Boston Therapeutics, 5G Investment, Alliaqua, Aspen Group, Brazahav Resources, Fusion Telecoms International, Protea Biosciences Group, Aeolus Pharmaceuticals, Medovex Corp, Relmada Therapeutics, Sevion Therapeutics, Spectrascience, and Spherix.

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