Securities Lawyers Blog
Former Newbridge Securities Corporation (Newbridge) broker Austin Dutton (Dutton) has been subject to two complaints and a recent sanction citing dishonest or unethical practices in the securities business by the Pennsylvania Department of Banking and Securities and fining Dutton $200,000. According to a BrokerCheck report Dutton recommended the purchase of a security to at least one customer without reasonable grounds to believe that the transaction was suitable for the customer.
In addition, Dutton’s firm, Newbridge, was also sanctioned by the state of Pennsylvania on findings that “From in or about January 2012 until December 2016, Newbridge did not maintain a reasonable system for applying and enforcing written procedures pertaining to their sales of structured products by one agent in Pennsylvania to certain of his clients…” While The order does not name the broker it appears reasonably related to Dutton.
According to newssources, Dutton is known to have recommended and sold and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs). In particular Dutton sold real estate investment trusts formerly managed by Nicholas Schorsch’s private firm, American Realty Capital (ARC), now AR Global. An accounting scandal affected ARC and its REITs. According to sources, Dutton sold these products to retirees and police officers.
All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
In addition, the number of disclosures with respect to Dutton is high relative to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.