Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Darren Ofsink (Ofsink), previously associated with Primary Capital, LLC, has at least one disclosable event. These events include one tax lien, alleging that Ofsink recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on April 04, 2023.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Darren L. Ofsink (‘Respondent’ or ‘Ofsink’) pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice. The Commission finds that on March 31, 2023, a final judgment was entered by consent against Ofsink, permanently enjoining Ofsink him from future violations of Sections 5(a) and 5(c) of the Securities Act of 1933 thereunder, in the civil action entitled Securities and Exchange Commission v. DiScala, et al., 14-cv-4346 (ENV), in the United States District Court for the Eastern District of New York. The Commission’s complaint alleged that Ofsink helped execute the reverse merger of CodeSmart Holdings, Inc. (‘CodeSmart’) into a public shell company. The complaint further alleges that Ofsink helped restrict the supply of CodeSmart securities available for sale and obscure the holdings of other key individuals. The complaint further alleges Ofsink received and sold shares of CodeSmart, the offer and sale of which was not registered, for substantial proceeds. On January 31, 2023, a judgment of conviction was entered against Ofsink in United States v. DiScala, 14 cr. 399 in the United States District Court for the Eastern District of New York, finding him guilty of one count of conspiracy to commit securities fraud, in violation of Title 18, United States Code, Section 371. On January 20, 2023, Ofsink was sentenced to 21 months imprisonment, and ordered to pay joint and several restitution of over $12 million, and ordered to pay forfeiture of approximately $292,000.
Under the securities laws brokers are obligated to act in their clients’ best interests and provide only suitable recommendations for investments to the client. In addition, the SEC has promulgated ‘Regulation Best Interest (Reg BI)‘ which according to the SEC enhanced the broker-dealer standard of conduct beyond existing suitability obligations and requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Regulation Best Interest and the fiduciary standard for investment advisers are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest.
Brokers have an obligation to first obtain and evaluate sufficient information about a retail investor to form a reasonable basis to believe the account recommendations are in the retail investor’s best interest. Recommendations cannot be based on materially inaccurate or incomplete information. The cost of the recommendation and information about the investor are always included in material information. Types of costs that must be considered including account fees, commissions and transaction costs, tax considerations, as well as indirect costs.
In addition to obligation to understand the customer the broker must also investigate the product being sold. FINRA firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. A brokerage firm has a special relationship with a customer from the fact that in recommending the security, the broker represents to the customer that a reasonable investigation has been made. Accordingly, a brokerage firm may not rely blindly upon the issuer for information concerning a company in lieu of conducting its own reasonable investigation.
Additional investor safeguards include broker disclosure requirements. Brokers are required to reveal important events, such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters, publicly on their BrokerCheck reports. FINRA has acknowledged that recent studies provide evidence of the predictability of future regulatory and customer complaint issues for brokers with a history of such events. FINRA’s Office of the Chief Economist (OCE) published a study showing the predictability of disciplinary and disclosure events based on past similar events. The OCE study showed that past disclosure events, including regulatory actions, customer arbitrations and litigations of brokers, have significant power to predict future investor harm. The data shows that where a member firm on-boards brokers with a significant history of misconduct there is a high likelihood that the broker will continue to engage in similar behavior.
Ofsink has been in the securities industry for more than 6 years. Ofsink has been registered as a Broker with Primary Capital, LLC since 2009.
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.