Richard Gomez, of New York, New York, a stockbroker with Legend Securities, Inc., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity in connection with a Hearing Panel Decision containing findings that Gomez engaged in private securities transactions, and made unsuitable recommendations to investors. Department of Enforcement v. Gomez, No. 2011030293503 (June 10, 2016).
According to the Decision, Gomez made unsuitable recommendations of two entities, US Coal Corporation and Praetorian Global Fund, Ltd. in 2011. Gomez reportedly did not engage in adequate due diligence regarding the entities to discover certain red flags and other information prior to making such recommendations.
Apparently, Praetorian was a fraudulent private investment fund which was headed by John Mattera – an individual with a significant criminal background involving securities. The Decision stated that Praetorian stated, via its offering documents, that it held several hundred million dollars in pre IPO stock of large companies, including Zynga, Inc., Groupon Inc., and Facebook, Inc. Gomez reportedly did not engage in any steps to verify such claims and other red flags concerning potential fraud regarding Praetorian prior to making recommendations and effecting sales of $394,000.00 to investors.
The Decision stated that Gomez’s knowledge of Praetorian was derived in large part on what Mattera told Gomez and through details contained on Mattera’s affiliate websites. The Decision reported that Gomez admitted that he did not review any information from the SEC’s website throughout his investigation of Praetorian. FINRA stated that Gomez’s failure to conduct an independent investigation was the cause of his lack of awareness of several adverse information regarding Praetorian.
The Decision stated that Praetorian was fraudulent and did not own the pre-initial public offering shares that the company apparently claimed it owned. Subsequent to Gomez’s last sale of Praetorian stock to investors, the SEC filed an enforcement action against Mattera and other individuals for securities fraud pertaining to Praetorian. Mattera reportedly pled guilty to securities fraud, conspiracy, money laundering, and wire fraud.
According to the Decision, Gomez also failed to properly investigate US Coal prior to making recommendations. Apparently, US Coal was a private entity that intended on going public. The Decision stated that Gomez was recruited by Friedman, who was a manager of a private fund, Blackstone Capital Advisors. The Decision noted that Friedman never told Gomez that he was a founder of US Coal.
The Decision stated that Gomez placed a large emphasis on information that Friedman, as well as Friedman’s assistants, Hugo and Fulco, provided him. Particularly, the Decision stated that Friedman, Hugo, and Fulco asked Gomez to find purchasers for US Coal Shares because Blackstone Capital Advisors had acquired such shares from US Coal retirees who were in need of immediate funds and could not wait for an IPO.
Additionally, Gomez was reportedly informed by Hugo as to US Coal’s chief executive officer’s departure, but Gomez had not verified that the explanation was correct. Gomez, according to the Decision, further failed to confirm whether Merrill Lynch was US Coal’s second largest shareholder after Hugo had been evasive in responding concerning such. FINRA found that Gomez should have investigated several of the aforementioned red flags prior to making recommendations and ultimately selling $105,000.00 in US Coal stock to customers. US Coal, according to the Decision, never had an IPO, and the company was forced into bankruptcy in 2014.
FINRA’s Hearing Panel found that as a result of Gomez’s failure to conduct an adequate investigation into the aforementioned entities, Gomez did not have reasonable grounds for making recommendations of the aforementioned securities to customers. Gomez admitted to making misrepresentations, and was found to have violated FINRA Rule 2010 and NASD Rule 2310.
FINRA noted that Gomez ultimately recommended and effected the sales of a minimum of $499,000.00 in securities that were worthless. In connection with the sales, he made at least $36,000.00 in commissions from the US Coal and Praetorian transactions. FINRA found that Gomez acted in an extremely careless manner and had not assumed responsibility for his conduct. This served as the basis of Gomez’s bar.
The Decision additionally noted that Gomez admitted to FINRA that while he was working at Legend Securities, he had engaged in the sales of US Coal and Praetorian outside of the auspices of his firm. Apparently, his participation in such transactions spanned over six months. The Decision stated that Gomez was prohibited from engaging in private securities transactions unless he received written permission from his member firm.
Despite his firm’s policies regarding private securities transactions, Gomez apparently hid his conduct from Legend by utilizing his personal email, rather than his firm’s, to correspond with investors regarding the US Coal and Praetorian transactions. Gomez reportedly admitted that his actions of selling away was something he knew he was not allowed to do. FINRA found Gomez’s conduct in this regard to be violative of FINRA Rule 2010 and NASD Rule 3040.
Public disclosure records reveal that Gomez has been subject to five public disclosure incidents, two of which involve customer disputes. On June 18, 2015, a customer was awarded $150,375.98 after claiming that Gomez committed negligence, fraud, and misrepresentations, as well as violations of the New York Consumer Protection Act. Gomez also became subject to a customer dispute on January 14, 2016, where a customer has requested $110,000.00 in damages after alleging that Gomez raked in excessive commissions, and engaged in unauthorized trading and churning.
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