Thursday, May 10, 2012

FINRA Bars Pinnacle Partner Financial Corp. and its President Over Allegedly Fraudulent Sales

On April 25, Financial Industry Regulatory Authority (“FINRA”) expelled broker-dealer Pinnacle Partners Financial Corp. and its president, Brian Alfaro, from membership after they failed to respond to allegations that they made fraudulent sales involving oil and gas private placements and unregistered securities in violation of Section 10(b) of the Securities Exchange Act of 1934.  In addition to expulsion, Pinnacle and Alfaro also were ordered to offer rescission to investors who were sold fraudulent offerings, and to refund all sales commissions to those who do not request rescission. See FINRA Order
According to FINRA, from August 2008 to March 2011, Alfaro and Pinnacle operated a “boiler room” from which approximately 11 brokers placed thousands of cold calls per week attempting to persuade investments in oil and gas drilling joint ventures that Alfaro owned or controlled.  FINRA claims the operation raised more than $10 million from more than 100 investors.  Alfaro allegedly misrepresented or omitted material facts regarding the offerings they sold to investors. 

FINRA also alleges that from around January 2009 through March 2011, Alfaro used customer funds: “(1) to meet obligations for previous offerings; (2) cover Alfaro’s personal expenses; and (3) make cash payments to Alfaro personally.”  See FINRA Order
The disciplinary proceedings began on November 23, 2010.  Alfaro and Pinnacle subsequently entered in Temporary Cease and Desist Consent Orders (“TCDO”).  Approximately two months after entering into the TCDO, Alfaro and Pinnacle allegedly violated the orders and were suspended from FINRA on March 8, 2011.  The hearing was scheduled for February 27, 2012 but Alfaro informed his counsel that he would not be attending the hearing and planned on defaulting.  As a result, Pinnacle and Alfaro were expelled from FINRA. 

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