This case arose from the sales of over $8 million worth of certificates of participation ("COPs"), which were tied to underlying projects involving the redevelopment of nursing homes, assisted living facilities, and other real estate ventures owned and controlled by Christopher Brogdon ("Brogdon"). COPs are a type of financing where an investor purchases a share of the revenues of a project rather than the bond being secured by those revenues. Primarily at issue in this case is whether Cantone Research, Inc. ("CRI" or the "Firm"), and Anthony Cantone ("Cantone") failed to disclose to investors negative material information that concerned both Brogdon's past financial and legal troubles and financial issues with the COPs at issue in this appeal. Specifically, the crux of the allegations concern that, when marketing the offerings, Cantone and CRI relied on a biography of Brogdon that highlighted his decades of success and his business acumen related to assisted living and nursing home management and redevelopment. However, the biography excluded negative information related to Brogdon's business failures, including two NASD bars, two bankruptcies, criminal fraud charges, substantial liens against a company he controlled, and a judgment against Brogdon in a breach of contract lawsuit.The complaint also alleges that CRI and Cantone failed to disclose one of their own significant business failings to investors. In addition to their failures to disclose Brogdon's negative financial and legal history, the complaint alleges that Cantone and CRI did not disclose to investors that Brogdon failed to make timely numerous interest payments, which were covered by undisclosed short term "loans" from the Cantones and CRI, as well as significant financial losses sustained by other Brogdon COPs. The complaint also alleges that Cantone and CRI convinced investors to extend two of the COPs beyond their original maturity dates without disclosing the real reason for the extension-that Brogdon was unable to pay. Finally, the complaint alleges that CRI and Cantone misused customer funds and that Christine Cantone ("C. Cantone") failed to reasonably supervise her husband Cantone's conduct related to these deals.The Extended Hearing Panel ("Hearing Panel") found that CRI and Cantone intentionally made material omissions and a misrepresentation in connection with the sale of securities in a series of private placements, in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Exchange Act Rule 10b-5 thereunder, and FINRA Rules 2020 and 2010, and negligently made additional material omissions in connection with the sales of securities, in violation of Sections 17(a)(2) and (3) of the Securities Act of 1933 ("Securities Act"), and FINRA Rule 2010. The Extended Hearing Panel suspended Cantone in all capacities for 15 months and fined him and CRI $150,000, jointly and severally. The Extended Hearing Panel also found that CRI and C. Cantone failed to supervise Cantone reasonably, in violation of NASD Rule 3010 and FINRA Rule 2010. The Hearing Panel suspended C. Cantone in all capacities for six months, and it fined her and CRI $75,000, jointly and severally.The Extended Hearing Panel concluded that Enforcement failed to establish that CRI and Cantone made improper use of customer funds or recommended an unsuitable investment, and it therefore dismissed these charges. . .
CRI and Cantone intentionally made material omissions and a misrepresentation in connection with the sales of securities in a series of private placements, in willful violation of Section 10(b) of the Exchange Act, Rule 10b-5 thereunder, and FINRA Rules 2020 and 2010. For these violations, Anthony Cantone is suspended in all capacities for one year and fined, jointly and severally with CRI, $100,000. CRI and Cantone also negligently made additional material omissions in connection with the sales of securities, in violation of Sections 17(a)(2) and (3) of the Securities Act, and FINRA Rule 2010. For these violations, Cantone is suspended in all capacities for three months and fined, jointly and severally with CRI, $50,000. The suspensions will run consecutively. For their willful violations of the Exchange Act, CRI and Cantone are statutorily disqualified. C. Cantone and CRI violated NASD Rule 3010(a) and FINRA Rule 2010 by failing to reasonably supervise Cantone. For these violations,C. Cantone is suspended for two years in any principal and supervisory capacities, and fined $73,000, jointly and severally with CRI. C. Cantone is also ordered to requalify as a securities principal upon the completion of her suspension. We affirm the Hearing Panel's dismissal of the charge that CRI and Cantone misused customer funds. . .
The customer alleged that Claimant, while a Financial Advisor with Respondent, gave her "inappropriate advice by instructing that she surrender a variable annuity". At the hearing, Claimant testified that he recommended against surrendering the annuity. He testified that he explained to the customer the disadvantages of surrendering the annuity, including surrender charges, and that she could withdraw 10% without incurring a penalty.Claimant's testimony was supported by his typewritten notes that "client stated that she makes her own decisions". Claimant's notes specifically reflect that he "[r]ecommended the client not do that [surrender the annuity] and only do the 10% if she wanted cash." Claimant's notes also reflect other unrelated instances where the customer decided not to follow Claimant's recommendations.Claimant's handwritten notes also reflect his conversation with the customer regarding her questions concerning the annuity.Claimant's testimony was further supported by the fact that the customer and Claimant met or spoke with each other on at least six (6) occasions following the surrender of the annuity but the customer did not claim that Claimant gave her inappropriate advice until a June 27, 2015 meeting that the customer's husband joined. . .
In this case, the Respondent acknowledged that erroneous information was entered on Claimant's U-4 and is reflected in the Broker Check. Claimant was not permitted to resign; he voluntarily left the firm. The parties stipulated that the documents need to be amended to reflect the voluntary departure.There were other matters that perhaps could best be described as ambiguities in the evidence. For example, Respondent offered three matters it believed were evidence of unauthorized trading. Only one matter is cited on the BrokerCheck and it appears that Claimant did not contribute to that settlement. Of the other two examples Respondent offered, one customer kept the securities in the account and did not contest the trades. It should be noted in this regard that Claimant was not investigated while at Respondent's firm; the investigation did not take place until after Claimant left and Respondent began to contact Claimant's customers.The other case not mentioned on the BrokerCheck had to do with a customer calling and indicating that more shares of an IPO than the customer expected had been purchased for the customer's account. The customer intended to participate in the IPO purchase. This could easily have been an execution error, whether institutional or systemic, due to a day which the parties agreed was "crazy" as the IPO had so much interest that the trading system broke down due to volume. There was no proof that the over-purchase was intentional or negligent on Claimant's part. This could be analogous to the misreporting of Claimant's departure status. The customer's account was corrected and no harm was incurred.