Securities Arbitration Investment Fraud Lawyers » Failure To Supervise » Carlton Associates Stockbroker Barred In Fraud Investigation

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Randy Warren Burke of Hickory, North Carolina, a stockbroker with Synergy Investment Group, LLC, Capital Investment Group, Inc., and most recently Carlton & Associates, Inc., was permanently barred in all capacities from associating with any Financial Industry Regulatory Authority (FINRA) member after consenting to findings that he participated in private securities transactions that were not approved by his member firms; made material misrepresentations and omissions in connection with the sale of such private securities; improperly used customer funds; failed to disclose his involvement in outside business activities; and provided false answers in response to annual certifications concerning his participation in private securities transactions and outside business activities. Letter of Acceptance, Waiver and Consent, No. 2015044129701 (Oct. 21, 2015).
According to the AWC, on February 4, 2008 and April 9, 2009, an elderly Synergy customer, HJ, made two investments of $25,000 in Lodge Alaska, LLC, a lodge business that Burke founded. In connection with the investment carrying a two year commitment, HJ was promised an eight percent rate of return. The AWC stated that Burke had participated in both of the investments by recommending them to HJ, creating investment confirmations, depositing HJ’s funds into a Lodge Alaska, LLC bank account that he controlled, and providing HJ with monthly statements. The AWC reported that HJ made additional investments in Lodge Alaska, LLC through 2011, where Burke participated in those transactions as well.
The AWC stated that Synergy and CIG both prohibited Stockbrokers like Burke from participating in the private securities transactions without first providing written notice to the firms and gaining the firms’ approval. Burke reportedly failed to provide such notice and gain approval for his transactions in 2008, 2009, and 2011 involving HJ. FINRA found Burke’s conduct in this regard to be violative of NASD Rule 3040, NASD Rule 2110, and FINRA Rule 2010.
The AWC further stated that from February 2008 – June 2013, while Burke worked with Synergy and CIG, Burke had failed to disclose to HJ the relevant facts concerning Lodge Alaska, LLC, which included the fact that Burke and his spouse owned Lodge Alaska; that Lodge Alaska did not own any assets or property and was not party to an Alaskan lease agreement or Canadian share purchase agreement; and that the operation and financing of the Alaskan and Canadian lodges resulted in substantial financial losses in each operating years.
According to the AWC, Burke had informed HJ that by investing in Lodge Alaska, LLC, she would be entitled to a cut of the profits from the future sale of the Canadian lodge property. FINRA found this statement to be false considering Lodge Alaska was not a party to a share purchase agreement and never owned any interest in the Canadian lodge. FINRA also found that Burke had represented to HJ that Lodge Alaska was raising up to $1,000,000 via selling membership units – a statement which was false because there were no additional investors solicited or who had invested in Lodge Alaska, LLC. FINRA found that such statements by Burke amounted to violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, NASD Rule 2120, FINRA Rule 2020, NASD Rule 2110, and FINRA Rule 2010.
The AWC also indicated that Burke represented to HJ that HJ’s funds that were invested in Lodge Alaska, LLC, would be used for general lodge operating expenses. Burke reportedly deposited JH’s funds into a business checking account that he held jointly with his spouse and that was used for business and personal banking. Following the deposit of HJ’s funds, according to the AWC, Burke’s personal expenses exceeded the business-related expenditures, which caused his use of the investment funds to be used for Burke’s personal expenses in 2011. FINRA found that by not using HJ’s investment in the appropriate manner as directed, he had violated FINRA Rule 2150(a) and 2010.
The AWC further stated that in 2009, while Burke was associated with Synergy, he incorporated a company called Saskatchewan, LTD, where Burke served as the president and director. Further, Burke reportedly opened and controlled a bank account in the name of Saskatchewan from September 2009 – June 2014 to effectuate banking transactions in Canada for the lodge business. All the while, the policies of Synergy and CIG required that Burke provide written disclosure and obtain approval for the outside business activities. In failing to disclose such information to his firm, FINRA found Burke to have violated NASD Rule 3030, FINRA Rule 3270, and FINRA Rule 2010.
According to the AWC, Burke falsely certified to Synergy on their Annual Compliance Questionnaires from 2008 and 2009 that he did not and never intended to recommend investments in the purchase of private securities. In 2012, Burke reportedly falsely certified to CIG on their Annual Compliance Questionnaire that he did not and never intended to recommend investments in the purchase of private securities. Burke further failed to disclose the truth of his outside business transactions in Synergy’s 2009 Annual Compliance Questionnaire and later CIG’s Questionnaire in 2012 and 2013. FINRA found Burke’s conduct in this regard to be in violation of NASD Rule 2110 and 2010.
According to FINRA Rule 3270, no registered person like Burke may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his/her member firm, unless he/she is provided prior written notice to the member.
Selling away, also known as private securities transactions or undisclosed outside business activities, occurs when a stockbroker engages or participates in the sale of securities to investors outside of the formal approval of the securities firm with whom they are associated.
As a general matter, stockbrokers are only permitted to engage in the solicitation or sale of investments and investment related products approved by their firm. However, quite frequently, stockbrokers solicit, participate, or directly engage in the sale of typically unregistered securities or investments without the approval and outside of the auspices of their firm. These investments may take on many forms, and may include the recommendation of an outside money manager, or a hedge fund, which may sometimes turn out to be a Ponzi scheme. Sometimes these outside investments may include off-shore securities, insurance trusts, stocks or ownership interests in small businesses, startup ventures, corporate debentures, mortgage notes, private placements, promissory notes, oil & gas interests, real estate partnerships, pre-IPO shares, and a variety of other investments.
Firms and individuals, not surprisingly, are prohibited from unauthorized use of customer funds, borrowing of a customer’s securities or funds, forgery, non-disclosures or misstatements of material facts, and various deceptions and manipulations. Such conduct can also be found to violate criminal and other civil laws, and be subject to sanction from the federal and state government bodies.
Section 10(b) of the Exchange Act makes it unlawful “to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
Four elements are necessary to show in finding a violation of Section 10(b) of the Exchange Act, Rule 10b-5: 1) misrepresentations and/or omissions were made; 2) misrepresentations and/or omissions were material; 3) representations and/or omissions were made with requisite intent (e.g. scienter), and 4) misrepresentations and/or omissions were made in connection with the purchase or sale of securities.
Public disclosure records via FINRA’s BrokerCheck reveal that Burke has been subject to eight disclosures. On November 21, 2006, Burke settled a customer dispute for $264,577.00 after customers alleged unsuitable recommendations and misrepresentations. On January 30, 2013, Burke was subject to a $51,215.96 civil judgment/lien. On July 24, 2013, Burke was subject to a $49,430.10 tax judgment/lien. On December 12, 2014, Burke was subject to a $11,280.01 tax judgment/lien.
On January 6, 2015, Burke became subject to a pending customer dispute where a customer is requesting damages of $88,407.00 in connection with the investments into Lodge Alaska, LLC, claiming the investment was fraudulent and that the funds were utilized by Burke for personal use. On January 27, 2015, Burke was subject to a bankruptcy action.

Guiliano Law Group

If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.