Finra Fines Remorseless BrokerDealer; CEO has no remorse for fraudulent conduct..
Is BrokerDealer Fraud on the Rise?
(FTF News)-A Financial Industry Regulatory Authority (FINRA) hearing panel has fined New York-based brokerdealer Avenir Financial Group $229,000 for “misconduct including the fraudulent sales of equity interests in the firm and promissory notes,” and suspended it for two years from engaging in any self-offerings.
In addition, the FINRA panel has barred former CEO and Chief Compliance Officer Michael Todd Clements from the securities industry for fraud, and “suspended registered representative Karim Ahmed Ibrahim (aka Chris Allen) for two years for fraud, and ordered Ibrahim to disgorge his $25,000 commission.”
In its original cease-and-desist order, issued in April 2015, FINRA characterized the firm’s fraudulent sales as “often to elderly customers of the firm,” specifying that during its three years as a FINRA member, “Avenir and its branch offices have raised over $730,000 in 16 issuances of equity or promissory notes. Most of these sales of equity and promissory notes were to elderly customers of the firm.”
The more recent FINRA report offers the following examples of defrauded clients:
- “In one instance, a 92-year-old customer was told his $250,000 investment would be used to grow the firm and fund its day-to-day operations, and that one day his investment would be returned ‘in a very large amount.’ Beyond the purchase agreement, Ibrahim did not provide the customer with any written materials, including any written information about the firm. Ibrahim admitted in testimony prior to the hearing that he was aware that Avenir faced a dire regulatory capital situation, yet he did not disclose this material fact to the customer.”
- Cesar Rodriguez, a now-barred registered representative who was under Clements’ direct supervision, “sold a 2 percent equity interest in Avenir for $100,000 to a customer who had recently lost his daughter in a car accident, and was investing the life insurance proceeds to provide for his six-year-old grandchild’s future. Rodriguez and Clements assured the customer that Avenir was a growth company that was doing ‘exceptionally well’ and was ‘growing exponentially.’ ” Meanwhile, according to FINRA, “Clements did not provide the customer with any written documents except for the purchase agreement, and neglected to provide any information about the firm’s financial condition, including that Avenir had recently been prohibited for several weeks from conducting a securities business due to insufficient capital. Rodriguez later also sold him equity and promissory notes in the branch office holding company.”
FINRA noted also that “Avenir and Clements failed to accept responsibility for their misconduct and that Ibrahim failed to express remorse, all of which were aggravating factors considered when assessing sanctions.”
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