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Pinnacle Partners Financial Corp. Expelled by FINRA

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A FINRA hearing officer has expelled Pinnacle Partners Financial, Corp., a broker-dealer based in San Antonio, TX, and barred its President, Brian Alfaro, for fraudulent sales of oil and gas private placements and unregistered securities. In addition, Brian Alfaro was found to have used customer funds for personal and business expenses. As restitution, Pinnacle and Alfaro are ordered to offer rescission to investors who were sold fraudulent offerings and refund all sales commissions to those customers who do not request rescission.

On the day Alfaro and Pinnacle Partners were to appear before the hearing panel, Alfaro decided not to attend the hearing. As a result, the hearing officer issued a default decision.

The hearing officer found that from August 2008 to March 2011, Alfaro and Pinnacle operated a boiler room in which approximately 10 brokers placed thousands of cold calls on a weekly basis to solicit investments in oil and gas drilling joint ventures Alfaro owned or controlled. Alfaro and Pinnacle raised over $10 million from more than 100 investors, and that Alfaro diverted some of the customer funds for unrelated business and personal expenses.

The hearing officer also found that Pinnacle and Alfaro included numerous misrepresentations and omissions in the investment summaries for 11 private placement offerings, including grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns and estimated monthly cash flows. Pinnacle and Alfaro deliberately attempted to mislead investors by deleting material, unfavorable information from well operator reports and providing investors with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling sites. In addition, Pinnacle and Alfaro distributed an offering document claiming that a previous venture had distributed more than $14 million to its investors when the actual distribution was less than $1.5 million.

The hearing officer decision also notes that from January 2009 to March 2011, Alfaro misused customer funds entrusted to him with the belief that the funds would be used for drilling and production in the wells in which their ventures invested. The funds were used for Alfaro’s personal expenditures and for business purposes that were not related to the purposes of the customers’ investments. When projects failed or were failing, Alfaro concealed his misuse of customers’ funds by persuading them to transfer their investment to his other oil and gas ventures. In one instance, Alfaro collected more than $500,000 in subscription costs for a well that was never drilled, and used those funds for unrelated personal and business expenses.

In April 2011, FINRA had suspended indefinitely Pinnacle and Alfaro for failure to comply with a FINRA Temporary Cease and Desist Order prohibiting their fraudulent misrepresentations. The suspension resulted from FINRA’s Notice of Suspension, which alleged that Pinnacle and Alfaro had continued to make fraudulent oral and written misrepresentations and omissions in connection with their offer and sale of certain oil and gas joint interests, and had otherwise failed to comply with the terms of the Temporary Order FINRA issued on January 21, 2011.

FINRA was represented at the hearing by Mark Dauer, Enforcement Deputy Chief Litigation Counsel, and Robert Long, Enforcement Senior Regional Counsel.

With a default decision, unless the hearing officer’s decision is appealed to FINRA’s National Adjudicatory Council (NAC) or is called for review by the NAC, the hearing officer’s decision becomes final after 25 days.

Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Brokerage Account Statements: Investor Alert

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The Financial Industry Regulatory Authority (FINRA) has issued an Investor Alert called “It Pays to Understand Your Brokerage Account Statements and Trade Confirmations.”

Investors are advised to carefully review their brokerage account statements every month, not just to confirm the balance but to also look for errors or signs of unauthorized trading or overcharges. 

Signs of Brokerage Account Fraud

FINRA warns investors to be aware of statements that appear unprofessional or altered in any way, since this may be a red flag for fraud. In some cases, according to FINRA, fraudsters simply cut and paste the logo of a legitimate firm onto their own bogus statement.

Other signs of fraud mentioned by FINRA include:

  • No specified end date or statement period on your statement.
  • End dates or statement periods that don’t follow a consistent pattern (such as the last day, last business day or last Friday of each month).
  • Account number that doesn’t match previous statements.
  • Wrong or outdated address, which could hamper delivery of account information.
  • Incorrect or outdated account ownership information.
  • The financial professional’s name is unfamiliar to you.
  • A phone number that is out of service or always busy or not answered.

Read more from FINRA’s guide, “It Pays to Understand Your Brokerage Account Statements and Trade Confirmations.”

Contact Fort Lauderdale securities attorney Howard N. Kahn, Esq., if you or someone you know has been the victim of fraud or unauthorized trading in regard to an investment or brokerage account. Mr. Kahn is an experienced securities attorney and FINRA arbitrator. You can him at 954-321-0176 or online.