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Broker Lies About Charging $11M In Commissions For Nontraded REITs and BDCs

FINRA charged a broker for lying to a Native American tribe about the $11 million in commissions he charged when he sold the tribe $190 million in nontraded real estate investment trusts and business development companies. Between June 2011 and January 2015, broker Gopi Krishna Vungarala “regularly lied to his customer, a Native American tribe, regarding investments he recommended,” according to the FINRA complaint. Vungarala served as the unnamed tribe's registered representative as well as its treasury investment manager, according to the complaint. He “fraudulently induced the tribe to invest hundreds of millions of dollars in nontraded REITs and BDCs, without revealing he and his firm received commissions for the sales (usually 7%) or the availability of certain volume discounts.” Also according to the complaint, the tribe bought $190.4 million of illiquid REITs and BDCs and were charged $11.4 million in commissions, which went to his broker-dealer Purshe Kaplan Sterling Investments. Mr. Vungarala was paid $9.6 million – or 84.3% - of those [...]

By |February 9th, 2016|FINRA, Fraud|
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Top Investor Threats

The following is a list compiled by the North American Securities Administrators Association of the top financial products and practices that threaten to trap unwary investors and small business owners: Unregistered Products / Unlicensed Salesmen: The offer of securities by an individual without a valid securities license should be a red alert for investors. Con artists also try to bypass stringent state registration requirements to pitch unregistered investments with a promise of “limited or no risk” and high returns. Promissory Notes: In an environment of low interest rates, the promise of high-interest-bearing promissory notes may be tempting to investors, especially seniors and others living on a fixed income. Promissory notes generally are used by companies to raise capital. Legitimate promissory notes are marketed almost exclusively to sophisticated or corporate investors with the resources to research thoroughly the companies issuing the notes and to determine whether the issuers have the capacity to pay the promised interest and principal. Most promissory notes must be [...]

By |January 22nd, 2016|Press Releases & News|
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FINRA December 2015 Disciplinary Actions: Part II

Wunderlich Securities, Inc. (Memphis, TN) submitted an AWC in which the firm was censured and fined $50,000. FINRA found that it failed to establish, maintain, and enforce an adequate supervisory system and written procedures regarding the preparation and dissemination of consolidated reports. The findings stated that although the firm’s WSPs expressly permitted the preparation and dissemination of consolidated reports, they did not adequately address how the firm would supervise the use of consolidated reports. The firm also failed to establish, maintain, and enforce an adequate supervisory system or written procedures to ensure the accuracy of any valuation information that was provided by a registered representative in a consolidated report and mandating the inclusion in consolidated reports of specific disclosures regarding the source and accuracy of any valuation information that was provided by a registered representative. In addition, the firm failed to establish, maintain, and enforce an adequate supervisory system and written procedures to ensure that supervisory reviews of consolidated reports were [...]

By |December 28th, 2015|FINRA, Press Releases & News|
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Texas REIT Plummets Following Ponzi Allegations

Stock in United Development Funding IV has gone into a free fall following a report published on an investor website that alleged the real estate investment trust has operated for years like a Ponzi scheme. Harvest Exchange, an online professional network for investors, published an anonymous post about UDF called "A Texas-Sized Scheme: Exposing the Darkest Corner of the REIT Business, United Development Funding," which currently controls $1.3 billion of assets in various REITS, including UDF IV. Based out of the Dallas-Fort Worth area, UDF IV was a nontraded REIT that listed on the NASDAQ in June 2014. It was sold to investors from 2009 to 2013 at $20 per share. “The UDF umbrella exhibits characteristics emblematic of a Ponzi scheme,” according to the Harvest posting. Those characteristics include new capital used to fund distributions to existing investors and subsequent UDF companies providing significant liquidity to earlier vintage UDF companies, allowing them to pay earlier investors. Once the funding of [...]

By |December 14th, 2015|Fraud, Press Releases & News, SEC|
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