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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Friday, December 3, 2010

FINRA Seeks Temporary Emergency Relief Against Alleged Boiler Room Operation

FINRA announced today that it filed a notice seeking a Temporary Cease and Desist Order (TCDO) against San Antonio-based brokerage Pinnacle Partners Financial Corporation and its President, Brian K. Alfaro. The TCDO would halt allegedly fraudulent and illegal sales activities at the firm relating to eight unregistered private placement offerings selling interests in oil and gas joint ventures. FINRA is seeking the order based on belief that customer harm and depletion of customer assets will likely continue before a formal disciplinary proceeding against Pinnacle and Alfaro can be completed. 

In its related underlying complaint against Pinnacle Partners and Alfaro, FINRA alleges that from August 2008 to the present Alfaro and Pinnacle have operated a "boiler room" in which numerous brokers place thousands of cold calls every week to solicit investments in Alfaro's oil and gas drilling joint ventures. The operators of the ventures are entities owned or controlled by Alfaro. Through the boiler room Alfaro and Pinnacle have raised more than $10 million from over 100 investors for offerings that are alleged to materially misrepresent or omit material facts. In addition, FINRA charges Alfaro with misusing customer funds by collecting funds from investors for drilling and testing of wells, and then spending those funds for unrelated business and personal expenses.

Under FINRA rules, a hearing shall be conducted not later than 15 days after service of the notice and filing that initiates the temporary cease and desist proceeding, unless extended, and the Hearing Panel shall issue a decision not later than 10 days after receipt of the hearing transcript. If the temporary cease and desist order is granted, it will generally remain in effect until the underlying disciplinary action against the firm for this misconduct has been resolved. FINRA may seek to suspend or expel a firm for violating a TCDO.

 

As to the related underlying complaint, under FINRA rules, the individuals and firms named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible sanctions include a fine, an order to pay restitution, censure, suspension, or bar from the securities industry.

http://lawprofessors.typepad.com/securities/2010/12/finra-seeks-temporary-emergency-relief-against-alleged-boiler-room-operation.html

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