Arni Jay Diamond (also known as Arni Jat Diamond), of Jacksonville, Florida, a stockbroker registered with Kalos Capital Inc., has been fined $5,000.00 and suspended for four months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Diamond recommended and sold unregistered and unsuitable GPB Capital limited partnership interests to two customers during the time that he was associated with Kalos Capital Inc. Letter of Acceptance, Waiver, and Consent No. 2018060897303 (Oct. 9, 2023).
The genesis of FINRA’s enforcement action stemmed from its probe into the sale of offerings connected to GPB Capital Holdings LLC (GPB Capital). Established in New York in 2013, GPB Capital is an alternative asset management enterprise. It is the general partner for limited partnerships that aim to acquire income-producing companies. Between 2013 and 2018, GPB Capital initiated several limited partnerships, specifically focused on acquiring controlling stakes in select private sector entities. Particularly relevant to FINRA’s concerns were three limited partnerships: GPB Waste Management LP (Waste Management), GPB Automotive Portfolio LP (Automotive Portfolio), and GPB Holdings, LP (Holdings).
According to the AWC, the securities offered by GPB Capital were not registered. These limited partnership stakes were, instead, sold under Regulation D of the Securities Act of 1933. Only accredited investors had the eligibility to procure these GPB Capital limited partnership interests. Also, GPB Capital’s offering documents explicitly highlighted that these interests were purely illiquid securities. These were intended solely for knowledgeable investors prepared to tolerate the economic and additional risks of investing in these interests for an indefinite duration. The documents further showed the speculative nature of these investments, underscoring the significant risk of losing the entire investment.
Between November of 2014 and March of 2018, Diamond made recommendations and executed sales of these GPB Capital limited partnership interests to two customers of Kalos Capital Inc. Specifically, Customer A, a 67-year-old individual, made a $50,000.00 investment in Automotive Portfolio in June of 2015. Customer A did not meet the accredited investor criteria, a prerequisite for investing in the Automotive Portfolio. Also, Customer A had only a moderate tolerance for risk and lacked prior exposure to investing in limited partnerships.
Customer B made a series of six investments between November 2014 and March 2018, aggregating to $200,000.00 in GPB Capital limited partnership interests. This sum encompassed a $50,000 investment in Holdings, three separate investments in Automotive Portfolio amounting to $90,000, and two investments in Waste Management, accumulating to $60,000. Customer B’s investment decisions in GPB Capital resulted in a high portion of his net worth, ranging between 28.7 percent and 32.5 percent, being tied up in alternative investments.
According to the regulator, Diamond’s advice to Customers A and B regarding investing in the GPB Capital limited partnership interests were unsuitable, considering their financial status, age, risk tolerance, and other factors. Consequently, Diamond violated FINRA Rules 2010 and 2111.
Public Disclosure reveals that Diamond is referenced in 17 customer initiated investment related disputes pertaining to Diamond’s actions during his association with securities broker dealers. On January 18, 2021, a customer initiated an investment related FINRA securities arbitration claim regarding Diamond’s actions. The claim was settled for $31,358.00 in damages based upon allegations that Diamond failed to perform adequate due diligence before recommending GPB products and United Development Funding (UDF). FINRA Arbitration No. 20-02083.
Diamond is also cited in another customer initiated investment related complaint that was settled on January 18, 2021, for $15,480.74 in damages. The settlement arose from allegations that Diamond made unsuitable recommendations of alternative investments during the time that he was associated with Kalos Capital Inc.
Diamond is also referenced in a customer initiated investment related FINRA securities arbitration claim in which the customer requested $50,000.00 in damages based upon alleged misrepresentations, breach of contract, and breach of fiduciary duty in connection with the sale of alternative investments. FINRA Arbitration No. 23-01213 (May 3, 2023).
On May 24, 2023, a customer filed an investment related FINRA securities arbitration claim involving Diamond’s conduct in which the customer requested $50,000.00 in damages based upon allegations that Diamond breached his fiduciary duties, was negligent, made misrepresentations of material fact, and breached contract in connection with the sale of direct investments. FINRA Arbitration No. 23-01405.
On August 24, 2023, a different arbitration claim involving Diamond’s conduct was settled for $37,333.00 in damages. This settlement was based on allegations that Diamond provided unsuitable investment recommendations and misrepresented direct investments to the customer. FINRA Arbitration No. 22-02137.
Diamond was associated with Supreme Alliance LLC in Charlotte, North Carolina from December 7, 2021, to January 6, 2022. He was also associated with Dempsey Lord Smith LLC in Jacksonville, Florida from September 14, 2018, to October 15, 2020. Earlier, he had been associated with Kalos Capital Inc. in Jacksonville, Florida from July 25, 2013, to September 14, 2018.