Christopher John Shaw (also known as Chris Shaw), of Belmont, North Carolina, a stockbroker registered with Kalos Capital Inc., has been fined $5,000.00 and suspended for three months by Financial Industry Regulatory Authority (FINRA) from associating with any FINRA member in any capacity because Shaw made unsuitable investment recommendations to senior customers. Letter of Acceptance, Waiver, and Consent No. 2018060897304 (October 23, 2024).
According to the AWC, Shaw recommended and sold limited partnership interests in GPB Capital Holdings LLC, to five customers, none of whom were accredited investors. These investments were unsuitable given the customers’ risk tolerance, net worth, age, and investment profiles. As a result of Shaw’s recommendations, each customer’s holdings in alternative investments, including GPB Capital, exceeded 30 percent of their liquid net worth, creating an excessive concentration that was inconsistent with their financial needs and investment objectives.
Between May 2016 and September 2017, Shaw recommended and executed several investment purchases. Customer A, a retired individual aged 63 with a moderate risk tolerance and an income objective, invested $254,000.00 across three transactions in GPB Capital limited partnerships. Customers B and C, a married couple both aged 64, with a moderate risk tolerance and an income objective, invested $210,000.00 across three transactions. Customer D, a 68-year-old planning to retire, with a moderate risk tolerance and an income objective, invested $250,000.00 across two transactions. Lastly, Customer E, a retired 64-year-old with a moderate risk tolerance and a capital appreciation objective, invested $90,000.00 in one transaction.
Shaw’s recommendations were unsuitable because they resulted in an overconcentration of the customers’ liquid net worth in alternative investments, exposing them to excessive risk. FINRA determined that Shaw violated FINRA Rule 2010 and Rule 2111, which requires a broker to have a reasonable basis to believe a recommended transaction or investment strategy is suitable for the customer.
The regulatory action against Shaw originated from FINRA’s investigation into the sale of offerings related to GPB Capital Holdings LLC. GPB Capital was a New York-based alternative asset management firm that launched limited partnerships between 2013 and 2018. These investments were offered under Regulation D of the Securities Act of 1933 and were only available to accredited investors. The offering documents described GPB Capital investments as high-risk, illiquid securities intended for sophisticated investors capable of withstanding potential total investment loss.
In February 2021, Securities and Exchange Commission (SEC) filed a complaint against GPB Capital and others, alleging securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Additionally, United States Department of Justice brought criminal charges against GPB Capital’s founder, CEO, and other executives, resulting in convictions on wire fraud, mail fraud, and securities fraud charges in August 2024.
This is not the first time that Shaw has been the subject of a regulatory action concerning Shaw’s conduct in the securities industry. FINRA Public Disclosure shows that Shaw has been suspended and fined $5,000.00 by FINRA because Shaw engaged in discretionary trading in customer accounts. Letter of Acceptance, Waiver, and Consent No. 2020067955001 (November 7, 2022).
According to the AWC, Shaw exercised discretion to execute trades in customer accounts on April 23, 2020, without obtaining written authorization from the customers or the securities broker dealer’s acceptance to trade on a discretionary basis. Shaw believed he had discretionary authority over the accounts; however, Pruco Securities LLC did not permit discretionary trading in its brokerage accounts.
FINRA found that Shaw’s actions violated FINRA Rule 3260(b), which prohibits stockbrokers from executing discretionary transactions in a customer’s account without the customer’s prior written approval and the securities broker dealer’s approval.
FINRA Public Disclosure also shows that Shaw was referenced in seven customer initiated investment related disputes concerning Shaw’s conduct while associated with securities broker dealers. On November 23, 2020, a customer initiated investment related FINRA securities arbitration claim involving Shaw’s conduct was settled for $125,000.00 in damages based upon allegations that Shaw breached his fiduciary duties and made unsuitable recommendations in alternative investments when Shaw was associated with Kalos Capital Inc. FINRA Arbitration No. 19-03047.
On January 22, 2021, a customer initiated investment related FINRA securities arbitration claim involving Shaw’s conduct was settled for $41,237.00 in damages based upon allegations that Shaw made misrepresentations of material fact and made unsuitable recommendations in real estate securities and private placements. FINRA Arbitration No. 20-00661.
Shaw was also referenced in a FINRA securities arbitration claim that was settled for $13,183.00 in damages based upon allegations that Shaw recommended direct investments to a customer who did not qualify as an accredited investor and failed to disclose offering documents. FINRA Arbitration No. 20-01214 (January 18, 2021).
On March 23, 2021, a customer initiated an investment related securities arbitration claim involving Shaw’s conduct was settled for $14,125.00 in damages based upon allegations that Shaw made unsuitable recommendations and misrepresentations in connection with the sale of direct investments during the time that Shaw was associated with Pruco Securities LLC. Arbitration No. FID1190833.
Shaw was also referenced in a FINRA securities arbitration claim that was settled for $25,000.00 in damages based upon allegations that Shaw made unsuitable recommendations, was negligent, breached his fiduciary duties, and breached a contract in connection with the sale of alternative investments, including non-traded real estate investment trusts when Shaw was associated with Kalos Capital Inc. FINRA Arbitration No. 21-00807 (June 30, 2021).
Shaw was associated with Newbridge Securities Corporation in Belmont, North Carolina, from September 24, 2020, to May 30, 2023. He was associated with Pruco Securities LLC. in Charlotte, North Carolina, from May 15, 2019, to September 15, 2020, and Kalos Capital Inc. in Belmont, North Carolina, from September 14, 2011, to May 9, 2019
