Broker Misconduct Lawyer Can Assist Risky Investment Practices

$500M of This Risky Private Placement Investment May Have Been Sold By Brokerage Firms

More than two years after the US Securities and Exchange Commission (SEC) announced that it had filed an emergency action against Complete Business Solutions (d/b/a Par Funding), many of those who collectively invested up to $500M in its alternative investment offerings are still grappling with how to recover their investor losses.

The Broker Misconduct Lawyer teams of Shepherd Smith Edwards and Kantas (investorlawyers.com) are speaking with these investors, many of whom may have been unsuitably sold these risky unregistered securities by brokers. If this is the case for you, then you may have grounds for filing a Financial Industry Regulatory Authority (FINRA) lawsuit against your broker-dealer for damages.

One example of a financial advisor accused of broker misconduct related to Complete Business Solutions is ex-IBN Financial Services broker Vincent Jerome Camarda. He was allowed to resign from the firm after the SEC accused him of alleged securities violations related to this purported offering scam. Camarda is accused of unlawfully selling these unregistered securities through AG Morgan Financial Advisors, where to this day he remains a registered investment adviser in New York. Another AG Morgan investment adviser and ex-IBN Financial broker, James McArthur, also is a defendant in the SEC civil lawsuit.

The two men allegedly raised over $75M from more than 200 investors without their broker-dealer’s approval and were paid more than $7M in compensation. Meanwhile, they purportedly did not notify investors that AG Morgan, which they operated, owed Par Funding about $750K. A few of the other broker-dealers where both men used to be registered include Traderfield Securities, LPL Financial, and American Portfolio Financial.

Why Did the SEC File a Securities Fraud Lawsuit Against Complete Business Solutions?

In July 2020, the Commission filed not only the emergency action but also obtained an asset freeze and a restraining order. The regulator wanted to stop the cash advance company’s alleged investment scheme that it said made loans that charged over 400% interest to small businesses.

It was in 2019 that Complete Business Solutions submitted a Form D to raise funds from investors. Its unregistered private placements would have been considered risky investments from the start and likely charged high fees and commissions.

What Are Regulation D Private Placements?

Under the Securities Act of 1933, all securities are required to either register with the SEC or qualify for an exemption. Regulation D, which is a type of private market exemption, allows for investor funds in private markets to be raised without having to be registered with the Commission. With these alternative investments that are private placements, there are fewer reporting requirements and such offerings are not under the purview of some of the laws and regulations that are supposed to protect investors.

Private placements can be risky investments. They are usually illiquid and there are often restrictions on how an investor may transfer or sell these holdings. Private placement investors may even be required to hold these securities indefinitely.

Not only that, but the companies that issue unlisted securities may offer little if any transparency. Other considerations that could add to the risks are the age of the company, its financial history, and the experience (or lack thereof) of its executives.

What Kind of Investors Are Regulation D Private Placements Unsuitable For?

Regulation D private placements are not suitable for every individual investor. Typically, you must be an accredited investor to qualify:

1) Someone who has earned $200K (or $300K with a spouse or spousal equivalent) for each of the last two years and reasonably expects to make the same during the current year.

2) A person who has an over $1M net worth either by themselves or with a spouse or spousal equivalent.

3) A broker or financial professional in good standing with certain designations, certifications, or credentials.

There are non-accredited investors who might also qualify but they must be sophisticated investors that meet certain criteria.

Most retail customers and inexperienced investors have not accredited investors and there is no reason why their financial advisors should market or sell regulation D private placements to them. Unfortunately, the high commissions and fees that brokerage firms can earn from selling private placement investments may be a greater incentive than looking out for a customer’s best interests. This can place unsophisticated investors who don’t have the necessary risk tolerance level at huge risk of financial loss.

How Can You Recover Your Par Funding Investor Losses From Your Broker?

Broker-dealers have a duty to conduct the necessary and proper due diligence into any investment they recommend to you. They also must make sure that such recommendations are suitable given your age, risk tolerance level, financial goals, investing experience, income, and net worth. Failure to conduct proper due diligence and making unsuitable investment recommendations may be grounds for a FINRA lawsuit should you suffer investor losses as a result.

Brokerage firms also must properly supervise their financial advisors. They can be held liable even if they were unaware that a registered representative engaged in broker misconduct.

Shepherd Smith Edwards and Kantas Partner and Broker Misconduct Lawyer Kirk Smith:

Hire a Knowledgeable Reg D Private Placement Broker Misconduct Lawyer For Investors

For over 30 years, Shepherd Smith Edwards and Kantas Broker Misconduct Lawyer team have been helping private placement investors to recover their losses in FINRA arbitration, mediation, and litigation. Call our skilled Complete Business Solutions investor loss attorneys at (800) 259-9010 today.