Darren Michael Kubiak of Alpharetta, Georgia, a stockbroker registered with Kalos Capital Inc., is the subject of an enforcement action initiated by FINRA in which the regulator is seeking sanctions against Kubiak based upon allegations that Kubiak failed to testify during the time that FINRA investigated the stockbroker for possible violations of FINRA rules. Department of Enforcement v. Darren Michael Kubiak, Complaint No. 2018060897302 (July 27, 2023).
According to the Complaint, FINRA investigated Kubiak’s investment recommendations between April of 2016 and May of 2018. He had allegedly advised ten or more customers, two of whom were elderly individuals, to invest in four limited partnerships managed by GPB Capital Holdings LLC.
FINRA sent Kubiak a letter on May 18, 2023, asking him to testify on June 21, 2023, regarding his investment advice. The letter was sent to Kubiak’s mailing and email addresses. However, Kubiak did not respond, and he failed to testify on June 21, 2023, nor did he ask for an extension.
Subsequently, FINRA sent Kubiak another letter on June 21, 2023, asking him to testify on July 6, 2023. This was also sent to his mailing addresses and the two remaining email addresses. Once again, Kubiak failed to respond or appear for the testimony.
Kubiak’s absence obstructed FINRA’s investigation into his actions. This investigation was aimed at determining whether Kubiak’s recommendations of GPB Capital Related Limited Partnerships were suitable. Kubiak’s refusal to testify showed that he violated Rules 2010 and 8210.
This is not the first time that Kubiak has been the subject of a regulatory action concerning Kubiak’s conduct in the securities industry. Public Disclosure shows that Kubiak has been fined $5,000.00 and suspended for three months by FINRA because Kubiak made unsuitable recommendations during the time that he was associated with Kalos Capital Inc. Letter of Acceptance, Waiver, and Consent No. 2016048196801 (August 6, 2019).
Between August of 2011 and January of 2015, Kubiak suggested 19 purchases of leveraged inverse exchange-traded funds (LIETFs) to 17 customers. These were active solicitations. Those customers held the funds for varying amounts of time, from less than a year to nearly six years. On average, these holdings lasted for about two years. Because of these lengthy holding periods, Kubiak’s customers collectively lost approximately $98,000.00.
Kubiak didn’t perform an adequate analysis to better grasp the special aspects and risks registered with LIETFs before selling them to his customers. The regulator stated that he expected his customers to hold onto these funds for just a few weeks, even though that was against the recommended guidance for these types of investments. Kubiak also wasn’t cognizant about LIETFs typically decreasing in value over time, and that losses can intensify due to the daily resets in the funds’ valuations.
As a result of this misconduct, Kubiak violated several FINRA Rules 2010 and 2111, as well as NASD Rule 2310.
FINRA also found that Kalos Capital Inc. failed to set up and manage an effective supervision system from August of 2011 to April of 2015. This system should have ensured that sales of LIETFs were compliant with securities regulations and laws. Kalos’ system did not properly address the special aspects and risks of LIETFs, nor did it address how to supervise or train its representatives to sell these funds. Additionally, Kalos did not offer professional training to stockbrokers before allowing them to sell LIETFs to customers. Therefore, Kubiak wasn’t sufficiently trained about these funds before he started selling them, leading to his customers holding onto them for too long.
Kalos violated FINRA Rules 3110(a) and 3110(b) as well as NASD Rules 3010(a) and 3010(b).
Kubiak was also referenced in a customer initiated investment related complaint that was settled on January 18, 2021, for $60,422.00 in damages based upon allegations that Kubiak made unsuitable recommendations of alternative investments. On January 18, 2021, a different customer initiated investment related FINRA securities arbitration claim involving Kubiak’s conduct was settled for $160,083.00 in damages based upon allegations that Kubiak was negligent, made misrepresentations of material fact, breached a contract, breached fiduciary duties, and committed fraud. FINRA Arbitration No. 20-02799.
Kubiak was also referenced in a customer initiated investment related FINRA securities arbitration claim that was settled for $19,783.00 in damages based upon allegations that Kubiak made unsuitable recommendations of direct investments. FINRA Arbitration No. 20-00411 (January 18, 2021). On July 27, 2021, another customer filed an investment related FINRA securities arbitration claim involving Kubiak’s conduct in which the customer requested between $500,000.00 and $1,000,000.00 in damages based upon allegations that Kubiak failed to supervise certain representatives, breached fiduciary duties, and breached a contract in connection with the sale of direct investments, real estate securities, and preferred stocks during the time that Kubiak was registered with Kalos Capital Inc. FINRA Arbitration No. 21-01917.
Kubiak is also referenced in a different customer initiated investment related FINRA securities arbitration claim in which the customer requested $1,000,000.00 in damages based upon allegations that Kubiak breached fiduciary duties, violated state securities laws, failed to supervise certain representatives, and breached a contract in connection with the sale of real estate securities, direct investments, and stocks. FINRA Arbitration No. 21-01917 (September 17, 2021).
Kubiak was registered with Kalos Capital Inc. as a stockbroker from January 3, 2007, to October 10, 2019.
