Scott Silver, Esq. Highlights Risk Of FINRA’s After The Fact Fines

Silver Law Group founder and managing partner Scott Silver has been featured in an article on Investment News’ website where he discusses FINRA’s increased scrutiny of brokers and investment advisors who recommended and sold high-risk private placements and other investments from Dallas-based GPB Private Holdings.

Scott has been working with some of GPB’s investors to help recoup some of the lost funds. “From my clients’ perspective, it’s frustrating to see FINRA charging brokers after the nail is in the coffin of their portfolios due to speculative, overconcentrated positions in risky alternatives,” Mr. Silver said. “In this day and age, it’s not hard to track brokers doing this kind of behavior that could be prohibited at time of sale. And it gives the investor no solace to see this kind of slap on the wrist years after the fact.”

The focus on individual brokers who sold GPB may be too little, too late. One of Silver Law Group’s clients is a 67-year-old person who made an investment of $50,000 into one of GPB’s private placements in June of 2015. Despite the requirement that private placements should only be sold to investors with a specific net worth or annual income, or shown to be an accredited wealth investor, this investor was sold a private placement anyway.

GPB’s private placements were limited partnerships that were created to procure income-producing companies like trash hauling and pickup companies and car dealerships. Beginning in 2013, GPB raised $1.8 billion from retail investors. Five years later, the company unraveled after it stopped paying investors in 2018, failed to file proper financial audit forms, and the SEC charged the company’s senior executives with fraud.

Since the implosion and subsequent bankruptcy of GPB, FINRA has penalized multiple broker-dealers for their mishandling of these risky private placements. Investors were led to believe that GPB Holdings’ private placements would enhance their retirement income. Instead, they saw their investment funds frozen. These placements were never intended for individual retail investors, but broker-dealers sold them anyway.

FINRA Claims For Selling Private Placements

FINRA is now looking at the individual brokers and financial advisors who freely recommended these risky private placements to their clients. Last month, FINRA suspended broker Arni J. Diamond (CRD# 2667392, aka, “Arni Jat Diamond”) for four months and fined him $5,000 after its investigation.

FINRA found that Diamond recommended to two clients over the age of 60 these highly speculative alternative investments that were unsuitable for their investment profiles. One investor was not an accredited investor, as is required for investing in these limited partnership interests. Diamond’s recommendations to the second investor led to the over-concentration of their net worth into the alternative investments.

In the industry since 1995, Diamond has a total of 19 disclosures, including one termination. His last listed employer is Supreme Alliance, LLC, (CRD# 45348) of Charlotte, NC, and he was registered there until 1/6/2022.

Diamond was previously registered with an Atlanta-based broker-dealer called Kalos Capital Inc. when he sold GPB’s securities. However, Kalos Capital filed for Chapter 11 bankruptcy in October of 2022 following the surge of claims related to GPB private placements.

Did You Invest In A Private Placement?  

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. Silver law Group recently prevailed on a FINRA arbitration claim for the sale of GWG L Bonds and currently represents many investors for the unsuitable sale of private placements.  If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.