Guiliano Law Group, P.C. (Philadelphia) announced that is has filed investor claims against securities broker-dealers in connection the recommendation and sale of GPB Capital, and its related entities including GPB Automotive.
The Statement of Claim filed before the Financial Industry Regulatory Authority or FINRA alleges the violation of the federal securities laws, the Pennsylvania Securities Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Act, and for the sale of unsuitable securities, negligence, common law fraud, the failure to conduct due diligence, breach of fiduciary duty, and the failure to supervise.
GPB suspended investor redemptions. GPB suspended distribution payments to investors, and its auditor resigned and that the FBI raided GPB’s offices in New York, and officials of GPB have been indicted on charges that include obstruction of justice.
The Statement of Claim alleges the failure to properly disclose to investors that those distributions were going to be paid out of working capital which could include investor contributions or funds flowing from new investors, much like a Ponzi scheme.
According to the Statement of Claim, approximately 20% of every dollar raised by GPB Automotive was used to pay underwriters, sales persons, and other promoters, fees, including “due dilgence” fees, which given that the company raised $1.8 billion, is astounding.
The Statement of Claim alleges that in connection with the recommendation of these securities there was a failure to conduct due diligence, disclosed these exorbitant fees and the self-dealing by GPB Capital executives and their affiliates which benefitted the fund managers at the expense of investors.
It is well settled that a securities dealer must have an adequate and reasonable basis in order to recommend a security. In connection with recommendations, securities dealers “owe a special duty of fair dealing to their clients” and “implicitly represents he has an adequate basis for the opinions he renders.” These duties have been described as” implicit warranties of the soundness of the stock, in terms of value, earning capacity, and the like.”
As the US Securities & Exchange Commission, in its approval of the consolidated FINRA Suitability Rule observed:
Reasonable-basis suitability requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors.
In general, what constitutes reasonable diligence will vary depending on, among other things, the complexity of and risks associated with the security or investment strategy and the firm’s or associated person’s familiarity with the security or investment strategy.
A firm’s or associated person’s reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards associated with the recommended security or strategy.
See Securities Exchange Act Release No. 63325 (November 17, 2010).
Other public allegations against GPB Holdings, and its officers including Patrick Dibre, according to a complaint filed in New York State Court states that investor funds and partnership assets were being misused at the expense of investors. Dibre served as Director of GPB Automotive Retail at GPB Capital Holdings, and his responsibilities were to include formulating automotive retail strategy, and structuring, potential acquisitions and divestitures, but that only new car dealerships had been acquired many of which had been previously owned by Patrick Dibre (emphasis added).
The Massachusetts Division of Securities has initiated an investigation into sixty three broker-dealer firms and financial advisors selling GPB investments. The United States Securities and Exchange Commission and the Financial Industry Regulatory Authority have also opened a regulatory investigation into the sale of GPB to investors.
Our practice is limited to the representation of investors. Over the last three decades, we have recovered more than a hundred million dollars for more than 1,000 injured investors from all over the United States and several foreign countries. We accept representation purely on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a confidential consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com.
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com.
If you believe that you have been the victim of brokerage fraud, contact us for a free consultation.
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