Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) barred broker Joseph Pappalardo (Pappalardo) concerning allegations that between August 2008, and August 2012, Pappalardo, while associated with Financial Network Investment Corporation (n/k/a Cetera Advisor Network LLC), made fraudulent and misleading misrepresentations to a customer in the sale of private securities, converted customer funds for his personal use, engaged in private securities transactions (a/k/a “selling away”), failed to disclose several outside business activities, and failed to amend his U4.
Pappalardo joined Financial Network Investment Corporation in 2008 and was required to complete a several questionnaires including disclosures of outside business activities. In 2008, FINRA alleged that Pappalardo disclosed on the questionnaire that he had previously been involved with a real estate company he formed in 2003 called Coast-2-Coast Properties (C2C) that was in the business of buying, renovating, and selling houses but that the company was no longer in business. FINRA alleged that Pappalardo’s statement was false. In fact, FINRA found that Pappalardo was involved in several outside business activities that he failed to disclose to Cetera including ongoing involvement in C2C and its marketing arm Prosperity Financial Estate Planning and Insurance Services (Prosperity Financial).
Thereafter, FINRA found that Pappalardo solicited customers to invest in these businesses. In one instance, FINRA found that Pappalardo solicited the sale of a $100,000 investment in Prosperity Financial which Pappalardo converted for his personal use. In total, FINRA found that Pappalardo solicited C2C to at least 6 customers and purported to offer investors 12% interest returns on profits generated by the business. FINRA found that the investors did not actually own any portion of the real estate properties held by C2C but instead were to receive interest returns on profits from Pappalardo and the business. FINRA found that by engaging in the C2C private securities Pappalardo violated the FINRA rules.