Cantone Research Inc. a FINRA member brokerage firm headquartered in Tinton Falls New Jersey and its president Anthony Joseph Cantone have been sanctioned by Financial Industry Regulatory Authority (FINRA) according to a National Adjudicatory Council Decision containing findings that (1) the firm and Cantone made misrepresentations concerning securities sold through private placements (2) the firm and Cantone omitted information concerning securities sales and (3) the firm’s Chief Compliance Officer neglected to supervise Cantone in the course of Cantone’s private placement transactions. In the Matter of the Department of Enforcement v. Cantone Research Inc. No. 2013035130101 (Jan. 16, 2019).
FINRA Department of Enforcement initially pursued the matter against Cantone Research Inc. because of the sales of more than $8,000,000.00 worth of the certificates of participation. FINRA stated that those certificates of participation had been connected to several projects which included real estate ventures, assisted living facilities and redevelopment of nursing homes that had been acquired and managed by Christopher Brogdon.
Apparently, the certificates of participation were a finance mechanism involving an investor’s purchase of a share of a project’s revenues instead of a bond secured through those projects revenues. The Decision stated that Cantone and the firm omitted from investors the information which negatively affected the investment transactions. In particular, Christopher Brogdon reportedly had a number of legal and financial troubles and concerns, and information concerning him was not communicated to the investors by the firm or Cantone. Omissions were also reportedly made concerning the financial issues pertaining to certificates of participation.
FINRA found that the firm and Cantone were merely depending on a biography of Christopher Brogdon which omitted, inter alia: Brogdon being subject of a judgment because of breaching a contract; there being a number of liens against entities that Brogdon controlled; charges being brought against Brogdon for fraud; Brogdon being subject of two bankruptcies; and Brogdon being barred on two separate occasions by National Association of Securities Dealers (NASD).
The Decision stated that the firm and Cantone did not inform prospective investors about the fact that it incurred a number of failures as a going concern. Moreover, the firm and Cantone reportedly neglected to inform investors about Brogdon’s supposed failure to pay investors interest that were covered through loans from Cantone, his spouse and the firm. The Decision also stated that Cantone failed to disclose that other COPs were not as successful; there were substantial losses that were incurred. Moreover, two investors were persuaded by the firm and Cantone to maintain their COPS past the point of maturity because the firm and Cantone omitted that the reason for the terms being extended was the inability of Brogdon to pay the obligations.
Ultimately, FINRA’s Extended Hearing Panel concluded that there were willful misrepresentations and omissions made by Cantone and CRI pertaining to the private placement sales; conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5 and FINRA Rules 2010 and 2020. The Hearing Panel further found that Cantone made omissions violative of Securities Act of 1933 Sections 17(a)(2) and (3) and Rule 2010.
Ultimately, Cantone’s was fined a total of $150,000.00 and suspended for fifteen months from associating with any FINRA member in any capacity for his willful violations of Securities Act of 1934 Section 10(b), Securities Act of 1933 Section 17(a), and FINRA Rules 2010 and 2010.
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Cantone has been identified in four customer initiated investment related disputes containing allegations of his misconduct while employed with Cantone Research Inc. For example, a customer initiated investment related arbitration claim involving Cantone’s conduct was settled for $800,000.00 in damages based upon allegations of breach of fiduciary duty, negligence, failure to supervise the broker’s activities affecting the customer’s account, creation of fictitious investments and conversion of the customer’s funds. FINRA Arbitration No. 10-02349 (Dec. 17, 2013).
