Naefke circumvented his member firm’s guidelines regarding investing in illiquid investments by submitting documents, including illiquid investment letters and account information forms, that falsified and exaggerated customers’ net worth which in turn permitted investments in amounts that the firm would have otherwise prohibited and that were unsuitable for the affected customers.
The firm had internal guidelines that limited the amounts customers were permitted to invest in illiquid investments; the internal policy further stated that illiquid investments for older investors required additional review and consideration pertaining to their needs for liquidity and income. Naefke submitted documents that knowingly falsified customers’ net worth, causing his firm’s books and record to be inaccurate and customers to invest in illiquid investments in amounts that his firm would have otherwise prohibited; and Naefke impeded his firm’s ability to adequately supervise the suitability of his recommendations.
On three illiquid investment letters, Naefke falsely stated that a
O at least two account information forms, Naefke falsely stated that an
O four illiquid investment letters, Naefke falsely stated that the
Naefke recommended and sold illiquid investment interests in publicly registered non-traded real estate investment trusts (REITs), direct participation programs and a limited partnership to customers totaling about $299,000. When Naefke made the recommendations and sales, he did not have reasonable grounds for believing that the recommendations were suitable based on each customer’s other security holdings, financial situation and needs.