Originally published by Shepherd Smith Edwards & Kantas LTD LLP.
The Financial Industry Regulatory Authority has ordered Avenir Financial Group to pay a $229K fine over allegations that the latter engaged in the fraudulent sale of promissory notes and equity interests in the firm. Avenir is suspended from taking part in the self-offerings of securities for two years.
According to the FINRA hearing panel, the firm, its ex-CEO/CCO Michael Todd Clements, and registered representative Karim Ahmed Ibrahim, also known as Chris Allen, purposely omitted or misrepresented material facts related to the sale of equity interests in the firm. Avenir is accused of making misrepresentations when selling debt and equity interests in the holding company of its branch office.
The FINRA ruling said that in 2013, Avenir solicited investors through funds via an equity self-offering because the firm needed capital. The self-regulatory organization said that Clements told Ibraham to tell customers that this money would go toward day-to-date operations and growth at Avenir but did not tell him about the firm’s financial issues and certain other information.
Ibrahim gave customers who agreed to invest a purchase agreement but not much else in the way of other written materials or information about Avenir. Ibrahim has since testified before FINRA that he knew that Avenir had financial issues but did not disclose them.
Now, FINRA has barred Clements from the securities industry and suspended Ibrahim for two years. The latter must disgorge $25K in commissions. The two men and Avenir must offer customers whom they defrauded rescission. The FINRA charges accusing Clements of aiding and abetting the fraud and Avenir of misusing customer funds have been dismissed.
In another example of alleged misrepresentation, ex-Avenir representative Cesar Rodriquez, whom FINRA barred in 2015, was accused of selling a 2% equity interest in the firm to a customer for $$100K. The customer had been investing life insurance proceeds for his grandchild. Clements and Rodriguez told the man that the firm was doing “exceptionally well” financially in terms of growth. The customer was only given his purchase agreement and no other written documents. He was not notified about Avenir’s financial issues even though at the time the firm was not allowed to conduct securities business because it did not have enough capital.
A FINRA panel has barred Clements from the securities industry.
Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our investment fraud lawyers work with investors to recover their losses.
Firm Fined $22K, Ordered to Offer Rescission to Defraud Investors, and Suspended Two Years from Engaging in Self-Offerings; Registered Representative Suspended Two Years, FINRA, September 20, 2016
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