Securities Lawyers Blog
The law offices of Gana Weinstein LLP are currently investigating claims made by The Securities and Exchange Commission (SEC) in which the agency charged a Pennsylvania investment adviser, Brenda Smith (Smith) with operating an investment advisory fraud involving over $100 million in investments. In conjunction with the SEC action the regulatory obtained an emergency asset freeze in order to preserve investor funds.
The SEC’s complaint alleges that Brenda Smith, and her fund Broad Reach Capital, LP, (Broad Reach Capital) raised $105 million from approximately 40 investors by representing that she would invest their money in publicly traded securities through various trading strategies that were promoted as providing consistent high returns. The SEC found that Smith instead made very few investments in these trading strategies and largely used investors’ money to repay other investors and for her own personal investments. The SEC alleged that Smith through entities she controlled disseminated false statements in order to tout positive returns and fabricated documents in an attempt to inflate Broad Reach Capital’s assets in order to lull investors into believing their capital was safe.
The SEC’s complaint charges Smith, Broad Reach Capital, the fund’s general partner Broad Reach Partners, LLC, and the adviser, Bristol Advisors, LLC with violating the anti-fraud provisions of the federal securities laws.
According to records kept by The Financial Industry Regulatory Authority (FINRA) Smith was a registered broker with CV Brokerage, Inc (CV Brokerage). In June 2019 CV Brokerage terminated Smith claiming non-compliance with FINRA Rules 8210 and 2010 in that Smith failed to provide documents and information requested in connection with a FINRA investigation into potential misstatements about the financial performance of an investment fund that were made during the course of private securities transactions in which Smith participated.
Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling fraudulent securities sales through OBAs. The sale of unapproved investment products – is a practice known in the industry as “selling away” – a serious violation of the securities laws. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. Sometimes those investments have some legitimacy but often times these types of investments can end up being Ponzi schemes or the advisor can be engaging in the conversion of funds.
When advisors convert or misappropriate funds they often create businesses or other vehicles to serve as a cover for the theft of funds. However, federal securities laws and the FINRA rules require firms to monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.
In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.
Smith entered the securities industry in 2006. From May 2010 until June 2019 Smith was registered with CV Brokerage out of the firm’s West Conshohocken, Pennsylvania office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.