Securities Lawyers Blog
The law offices of Gana Weinstein LLP continue to investigate the Woodbridge Group of Companies and the Woodbridge Mortgage Funds (Woodbridge). The Securities and Exchange Commission (SEC) has alleged that the Woodbridge operated a billion-dollar Ponzi scheme ensnaring about 8,400 investors. Woodbridge solicited hundreds of disreputable insurance agents and investment brokers to sell its false notes that the firm claimed to be backed by mortgages. In plain sight to regulators, Woodbridge engaged in a nationwide investment fraud by offering the sale of unregistered securities.
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) John Ernst (Ernst) appears to be an agent for Woodbridge fraudulent note sales. Ernst was formerly associated with Foresters Equity Services, Inc. (Foresters Equity) out of the firm’s San Diego, California office location. In November 2017 the State of Wisconsin opened an investigation into Ernst in connection with potential sales of Woodbridge promissory notes. In addition, Foresters Equity terminated Ernst in February 2018 stating that he violated the firm’s policies and procedures by engaging in an undisclosed private securities transaction away from the broker dealer without approval.
Federal securities laws and the FINRA rules require firms to monitor and supervise its employees, like Ernst, 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. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including recommending fraudulent investments.