Luke Michael Johnson, of Scottsdale, Arizona, a stockbroker registered with Coastal Equities Inc., is the subject of an enforcement action initiated by Financial Industry Regulatory Authority (FINRA) in which the regulator is seeking sanctions against Johnson based upon allegations that Johnson made unsuitable recommendations. Department of Enforcement v. Luke Johnson, Complaint No. 2019061213402 (July 12, 2023).
According to the Complaint, from April of 2015 until May of 2018, Johnson suggested the purchase of over $2,350,000.00 in non-liquid, alternative investments to nine customers (Customer A to Customer I). From these recommendations, Johnson allegedly made over $132,900 in fees.
FINRA claimed that Johnson’s suggestions for these nine customers to buy non-liquid, alternative investments were unsuitable considering investors’ backgrounds and because Johnson’s advice led to an overconcentration of the customers’ assets into non-liquid, risky securities.
Throughout this period, Johnson or colleagues of his allegedly manipulated these nine customers’ stated liquid assets and net worth on Coastal’s customer account forms. Johnson or other stockbrokers allegedly manipulated these customers’ stated liquidity needs, annual income, risk tolerance, and accreditation status, on the customers’ subscription agreements, account forms, and on alternative investment disclosure documents.
According to the Complaint, Johnson is responsible for the falsified information on records for customers and for customers’ investments.
The regulator also contended that starting in April of 2015, during the time that Johnson was with Coastal, the company had a policy that restricted its customers from making investments of over 35 percent of their liquid assets in alternative products. Johnson supposedly overstated his customers’ net worth and liquid assets and understated the proportion of his customers’ assets in alternative investment holdings to bypass Coastal’s investment concentration policies.
FINRA Department of Enforcement alleged that by making inappropriate investments to nine customers, Johnson violated FINRA Rules 2010 and 2011.
The Complaint also alleges that by falsifying documents for customers and causing inaccurate customer information on the securities broker dealer’s alternative investment documents and account records, Johnson violated FINRA Rules 2010 and 4511.
FINRA Public Disclosure shows that Johnson was referenced in twenty-six (26) customer initiated investment related disputes concerning Johnson’s conduct while associated with securities broker dealers. On May 9, 2022, a customer initiated investment related FINRA securities arbitration claim involving Johnson’s conduct was settled for $22,500.00 in damages based upon allegations that Johnson made unsuitable recommendations of real estate securities when Johnson was associated with Coastal Equities Inc. FINRA Arbitration No. 20-03956.
On August 22, 2022, a customer initiated investment related FINRA securities arbitration claim involving Johnson’s conduct was settled for $100,425.00 in damages based upon allegations that Johnson made unsuitable recommendations of real estate securities and direct investments (LP interests and DPP interests). FINRA Arbitration No. 21-01546.
Johnson was also referenced in a customer initiated investment related FINRA securities arbitration claim that was settled for $275,000.00 in damages based upon allegations that Johnson engaged in unsuitable trading in direct investments and real estate securities. FINRA Arbitration No. 21-01270 (October 17, 2022).
On February 28, 2023, a customer initiated investment related FINRA securities arbitration claim involving Johnson’s conduct was settled for $360,000.00 in damages based upon allegations that Johnson failed to perform due diligence in connection with the recommendation and sale of real estate securities and direct investments. FINRA Arbitration No. 20-03756.
Johnson is also referenced in a customer initiated investment related FINRA securities arbitration claim in which the customer requested $190,000.00 in damages based upon allegations that Johnson made unsuitable investment recommendations. FINRA Arbitration No. 23-01020 (April 17, 2023).
On June 9, 2023, a customer filed an investment related FINRA securities arbitration claim involving Johnson’s conduct in which the customer requested $117,922.90 in damages based upon allegations that Johnson engaged in unsuitable trading in direct investments. FINRA Arbitration No. 23-01700.
Johnson was associated with Coastal Equities Inc. as a stockbroker between April 3, 2012, and December 13, 2019.
