Brett I. Friedberg, of New York, New York, a stockbroker with HFP Capital Markets LLC, was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity per an Extended Hearing Panel Decision containing findings that Friedberg made unsuitable securities recommendations and negligently misrepresented information to customers. Department of Enforcement v. Friedberg, No. 2010024522103 (Mar. 23, 2016).
According to the Decision, from 2009 through 2011, while Friedberg worked in the capacity of HFP’s stockbroker and supervisor, he engaged customers in unsuitable recommendations and prompted sales pertaining to certain debt investments issued by Metals, Milling & Mining LLC (MMM), a company whose business involved precious metals extractions. The Decision indicated that customers were informed by Friedberg that they would receive a one-hundred percent return over a one-year period in connection with a private placement investment in the MMM notes.
Friedberg reportedly made the recommendations to customers, notwithstanding the lack of an adequate basis in concluding that the notes were actually suitable for the firm’s investors. The Decision indicated that customers were told by Friedberg that the investments in MMM were collateralized via ore concentrate barrels, in which Friedberg claimed that such collateral was adequate for purposes of securing the MMM notes.
FINRA’s Extended Hearing Panel found that Friedberg made false representations to customers, as the MMM investment was actually a scam. MMM apparently was an illegitimate operation and had not owned ore concentrate in any amounts. The Decision stated that the ore concentrate that Friedberg referenced to customers did not actually secure the notes. Friedberg’s ten victims incurred a one-hundred percent loss on their investment, which amounted to $600,000.00 in the aggregate. Friedberg made commissions amounting to $36,250.00 as a result of his sales to such customers.
The Decision further indicated that Friedberg was ultimately charged by FINRA’s Department of Enforcement in a Complaint alleging that he made unsuitable recommendations via his failure to properly conduct due diligence on the MMM notes prior to making such recommendations to customers. Friedberg reportedly denied charges; yet did not contest that MMM was a scam. Additionally, Friedberg did not contest that misrepresentations were made by him with respect to the aforementioned collateral.
Friedberg, in attempting to defend his conduct, claimed to have relied upon HFP’s chief executive officer’s representations concerning the notes; information contained in the offering materials provided by his firm; and his employer’s vetting process concerning the MMM offering. The Decision disclosed that FINRA did not buy into Friedberg’s claim of reasonably relying on information concerning the investments prior to making the recommendations.
The Decision conveyed that important information was not disclosed in MMM’s offering documents. Particularly, the documents had not addressed who owned or managed MMM; how the funds would be used; how MMM would conduct the precious metal extraction via ore concentrate; and failed to detail the profitability associated with such. FINRA found that Friedberg’s misrepresentations were grossly negligent, and held that he had no reasonable basis in determining that his customers should invest in such notes. FINRA barred Friedberg as a result of his misconduct.
Public disclosure records via FINRA’s BrokerCheck reveal that Friedberg has been subject to eight disclosure incidents. On May 8, 2012, Friedberg settled a customer dispute for $2,500.00 after a customer alleged to have received shoddy investment advice and was charged undisclosed and excessive commissions.
On May 14, 2012, Friedberg settled a customer dispute for $80,000.00 following customer claims of fraud, unsuitability, and breach of contract. On December 1, 2012, Friedberg settled another customer dispute for $13,423.84 after a customer claimed unsuitable transactions were effected by Friedberg.
On February 5, 2013, Friedberg was hit with a $5,000.00 monetary penalty and his broker-dealer registration was revoked by the State of Arkansas Securities Department after consenting to findings that he committed numerous violations of Arkansas’ Securities Act and rules promulgated by Arkansas’ Securities Commissioner. Particularly, he was alleged to have made untruthful or unjustified representations to customers with respect to securities, notwithstanding having no reasonable basis to conclude that such securities were suitable. On March 20, 2013, the State of New Hampshire revoked Friedberg’s securities license for three years in connection with securities law violations.
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