[B]etween 2014 and 2020, Sears directly and indirectly, through the use of third-party agents, sold at least $25 million of EquiAlt's securities to more than 145 largely unaccredited, unsophisticated, and elderly retail investors located in 25 states. During that period, Sears was identified in EquiAlt private placement memoranda as Managing Director of Investments, President of Business Development and Marketing, or Vice President of Investor Relations. Sears, through Picasso Group, received approximately $3.5 million in transaction-based sales commissions from EquiAlt, despite neither being registered as broker dealers. The complaint alleges that beginning in approximately 2016, EquiAlt was actually operating a Ponzi scheme during which it raised more than $170 million from approximately 1,100 investors in 35 states.
[F]rom approximately January 2017 to February 2019, Ashby, Beynon, and Nelson, through entities they controlled, sold investors interests in for-profit event centers purportedly being developed by Noah Corporation, an entity Bowser controlled. As alleged, Bowser diverted investor funds earmarked for specific properties and instead used them for Noah Corporation's and Bowser's operational and other expenses and to pay prior investors, rather than for construction of event centers as represented to investors. The complaint further alleges that contrary to their representations to investors, Ashby, Beynon, and Nelson failed to escrow investor funds and disbursed them to an entity Bowser controlled without having any controls in place to ensure that the disbursements were for legitimate expenses.
FINRA announced today that it sanctioned Worden Capital Management LLC (WCM) more than $1.5 million, including approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm's representatives, and a $350,000 fine for supervisory and other violations. As part of the settlement, WCM must also retain an independent consultant to conduct a comprehensive review of the relevant portions of the firm's supervisory systems and procedures.FINRA found that from January 2015 to October 2019, WCM and the firm's owner and CEO, Jamie Worden, failed to establish and enforce a supervisory system reasonably designed to achieve compliance with FINRA's rules relating to excessive trading. As a result, WCM's registered representatives made unsuitable recommendations and excessively traded customers' accounts, causing customers to incur more than $1.2 million in commissions. In one instance, a WCM customer whose account was traded for approximately one year had a cost-to-equity ratio (or breakeven point) of more than 100 percent and incurred realized losses of $118,490, inclusive of the $205,557 the customer paid in commissions. WCM did not take action to investigate or stop the trading in this customer's account, and others like it, even though WCM received a monthly active account report that routinely flagged dozens of customer accounts indicative of excessive trading.. . .FINRA also found that WCM and Worden interfered with customers' requests to transfer their accounts to another member firm. In addition, as a result of supervisory failures, WCM failed to timely file amendments to registered representatives' Form U4s and Form U5s to disclose the filing or resolution of customer arbitrations.For Worden's supervisory violation and his interference with customer account transfers, he agreed to a 15-day suspension in all capacities, a three-month supervisory suspension, a $15,000 fine and must complete 20 hours of continuing education.In settling this matter, WCM and Worden neither admitted nor denied the charges, but consented to the entry of FINRA's findings.