Gurpreet Singh Chandhoke and Stephen Fitzgerald Shea both of Orinda California and stockbrokers who were formerly registered with Penserra Securities LLC and Arete Wealth Management have been fined $50,000.00 and suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity according to a FINRA Office of Hearing Officers Order Accepting Offer of Settlement which contains findings that the stockbrokers participated in unauthorized outside business activities and were selling away. Department of Enforcement v. Gurpreet Chandhoke and Stephen Shea Disciplinary Proceeding No. 2015047244701 (Nov. 4, 2020).
According to the Order, between March of 2014 and August of 2017, Shea and Chandhoke failed to comply with obligations relating to their disclosures of outside business activities and private securities transactions while employed by FINRA member firms. The two stockbrokers formed technology company AlesiaTec Inc. and holding company PFU LLC from 2014 to 2015 without telling employer Penserra. Shea and Chandhoke both took part in distributing marketing materials and soliciting investors for AlesiaTec. The stockbrokers also opened up accounts and entered into financial transactions relating to real estate investments for PFU.
Between 2014 and 2016, two additional undisclosed outside business activities were purBring FINRA Arbitration Claim Against by Chandhoke. Chandhoke created and controlled Chandhoke Holdings and even obtained a $250,000.00 loan for the company to procure credit from a FINRA member firm. Chandhoke was obligated to inform Arete Wealth Management about these activities but failed to do so. Chandhoke also neglected to disclose to employer Penserra that he was the board manager of Relativity Media LLC which held itself out as a privately-held Hollywood studio.
Shea and Chandhoke violated FINRA Rules 2010 and 3270 by engaging in unapproved outside business activities.
The Order also stated that from March of 2014 to March of 2017, $1,039,925.00 worth of private securities transactions were initiated by Shea and Chandhoke. None of employers Gordian and Arete were apprised of these private securities transactions. Specifically, Shea and Chandhoke created investment funds VII Peaks Co-Optivist Funds which included VII Peaks-KBR Co-Optivist Income BDC III. The stockbrokers then created VII Peaks BDC Investors LLC to allow investors in Co-Optivist Funds to continue participating in investments and to bring in funds for a managing broker-dealer for Co-Optivist Funds.
FINRA stated that 10 private securities transactions were purBring FINRA Arbitration Claim Against by Shea and Chandhoke while registered with Gordian that involved the accumulation of $445,000.00 for purchases of Class B shares of VII Peaks BDC Investors. FINRA confirmed that the stockbrokers participated through managing and marketing the offerings.
FINRA also confirmed that Shea and Chandhoke took part in private securities transactions involving AlesiaTec. They accumulated $459,925.00 from four investors who purchased Series Seed interests in AlesiaTec. None of these transactions were made known to Arete by Shea or Chandhoke which precluded the securities broker dealer from learning of the stockbrokers distributing marketing materials and soliciting investors. An additional private securities transaction was consummated in March of 2017 by Shea and Chandhoke in which investors purchased $35,000.00 worth of Series A interests in AlesiaTec.
Gordian and Arete maintained written supervisory procedures which called for the stockbrokers to disclose information concerning any private securities transactions. This included the stockbrokers’ roles in those transactions. Shea and Chandhoke were never permitted in writing by their employers to sell away. Gordian and Arete actually prohibited its stockbrokers from selling away without receiving written approval. FINRA determined that Shea and Chandhoke violated FINRA Rules 2010 and 3280 as well as National Association of Securities Dealers (NASD) Rule 3040.