Gopi Krishna Vungarala (also known as Gopi Krishan Vungarala) of Midland Michigan a stockbroker formerly registered with Purshe Kaplan Sterling Investments has been isnamed in arbitration claim an Opinion by Securities Exchange Commission (SEC) who affirmed a decision by Financial Industry Regulatory Authority (FINRA) to bar Vungarala from associating with any FINRA member in any capacity for omitting and misrepresenting commissions and discounts relating to his alternative investment transactions. Administrative Proceeding File No. 3-18881 (Nov. 20, 2020).

According to the Opinion, while Vungarala was associated with Purshe Kaplan Sterling Investments, he was also an investment manager for a Native American Tribe who operated casinos and a resort. SEC mentioned that Vungarala was tasked by the Tribe with the management and monitoring of their investment portfolios. Vungarala’s duties included executing all investment transactions on behalf of the Tribe.

SEC stated that an investment policy promulgated by the Tribe had prohibited employees from business activities that might impair the employees’ abilities to property manage and executive the investment program. Vungarala was responsible for making transactions that were in the Tribe’s best interest. He failed to do this.

The Opinion noted that misrepresentations and omissions had been made by Vungarala as it pertained to commissions that he received for recommended business development company (BDC) and non-traded real estate investment trust transactions. Vungarala told the Tribe that he would not earn compensation relating to those transactions even though the prospectuses for those alternative investments called for him or Purshe Kaplan Sterling Investments to receive selling commissions.

Vungarala also failed to correct a Tribe employee’s assertion that Vungarala would not be paid commissions by Purshe Kaplan Sterling Investments. He also omitted those commissions each time that he was asked to explain the expenses and fees relating to BDC or REIT transactions. SEC stated that the Tribe invested approximately $200,000,000.00 in the alternative investments recommended by Vungarala. This caused Vungarala to receive $9,682,629.00 in commissions.

Omissions and misrepresentations continued being made to the Tribe by Vungarala after Purshe Kaplan Sterling Investments took in commissions for the alternative investment purchases. This included concealing that approximately 85% of the commissions paid to Purshe Kaplan Sterling Investments were going to Vungarala. The Opinion stated that Vungarala eventually informed the Tribal Council that he received those commissions but had donated them to charity.

The regulator also pointed out that omissions and misrepresentations were made by Vungarala concerning the Tribe’s ability to obtain volume discounts on BDC and REIT purchases. Vungarala was contacted by REITs regarding volume discounts at which time he claimed that the Tribe did not want them because of having to keep their trust accounts separate. This caused the Tribe to lose out on more than $3,300,000.00 in discounts while Vungarala took in $2,800,000.00 in commissions.

FINRA learned about the missed volume discounts relating to the Tribe’s investments. The regulator’s investigation uncovered that Vungarala had a conflict of interest relating to his positions with the Tribe and the securities broker dealer. The Tribe was contacted by FINRA which led the Tribe to question Vungarala’s investment recommendations.

FINRA determined that Vungarala’s conduct was violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5 and FINRA Rules 2010 and 2020. SEC confirmed that Vungarala defrauded the Tribe. The regulator upheld FINRA’s bar of the stockbroker for this reason.