Michael August Pellegrino of Oakbrook Terrace Illinois a stockbroker formerly registered with Taylor Capital Management Inc. (TCM) has been fined $10,000.00 and suspended for two months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that he provided misleading information to investors concerning short-term high-yield contracts. Letter of Acceptance Waiver and Consent No. 2017055120903 (Jan. 26, 2021).
According to the AWC, in July 2017, 80 investors received an advertisement from Pellegrino about short-term high yield contracts. Fifty of those investors held accounts through Pellegrino at Taylor Capital Management. The advertisement promoted a non-security investment which worked by investors signing a Memorandum of Indebtedness (MOI) in which they agreed to furnish funds when the MOI issuer requested them in exchange for an investment return.
Investors’ funds had been pooled by the MOI issuer and then distributed to small businesses through Merchant Cash Advances (MCAs). Those small businesses were not able to obtain normal financing through traditional routes which prompted them to agree to MCAs. At least 50 investors who received the advertisement from Pellegrino had entered into MOI contracts with the issuer.
FINRA stated that misleading and false claims had been made in the advertisement concerning investment performance. The advertisement also failed to include important information concerning MOIs. As an example, the advertisement stated that investors would receive up to 10 percent investment returns even though the issuer was not contractually obligated to make payments to investors and was not required to commit to a timeline on distributions. FINRA indicated that the amount paid to investors was at the discretion of the issuer which rendered any statements about 10 percent investment returns misleading. FINRA indicated that these types of projections were disallowed under FINRA rules.
The AWC highlighted additional misleading language made about the investments. The advertisement indicated that the investment was a high yield contract and that it was predictable and consistent. These terms did not reflect the true obligations of the issuer as they were not contractually obligated under the MOI to make any distributions to investors. FINRA also stated that those terms were misleading because of the risks pertaining to small businesses’ repayment of funds.
FINRA determined that Pellegrino violated FINRA Rules 2010 and 2210(d).
FINRA Public Disclosure reveals that Pellegrino has been identified in eleven customer initiated investment related disputes concerning accusations of his misconduct while employed by TCM Securities. On November 1, 2018, a customer filed an investment related FINRA securities arbitration claim regarding Pellegrino’s activities where the customer sought $200,000.00 in damages founded on allegations that the customers were advised by Pellegrino to invest in American Realty Finance (AFIN) and real estate investment trusts (REITs). FINRA Arbitration No. 18-03784.
On December 27, 2018, another customer filed an investment related FINRA securities arbitration claim concerning Pellegrino’s conduct in which they requested $341,182.80 in damages supported by accusations that investment recommendations were not suitable and that misrepresentations and omissions had been made to them in regard to corporate debt investments. FINRA Arbitration No. 18-03795. The claim also alleges that fraudulent products were sold by Pellegrino.
Pellegrino has additionally been referenced in a customer initiated investment related FINRA securities arbitration claim where the customer sought $161,089.32 in damages based upon allegations of fraudulent recommendations regarding Global Capital LLC MOIs. FINRA Arbitration No. 18-03794 (Jan. 3, 2019). According to the claim, information about Global Capital LLC had been concealed from the customer.
On July 11, 2019, another customer filed an investment related FINRA securities arbitration claim regarding Pellegrino’s conduct in which the customer requested $125,000.00 in damages founded on accusations of unsuitability and misrepresentation concerning real estate investment trusts sold by Pellegrino at TCM Securities. FINRA Arbitration No. 19-01918.
Pellegrino is also the subject of a customer initiated investment related FINRA securities arbitration claim where the customer was awarded $75,000.00 in damages based on Taylor Capital Management being found liable on the customer’s claims of Pellegrino’s unsuitable advice relating to Northstar Healthcare Income Inc. and American Realty Capital Trust V Inc. FINRA Arbitration No. 19-01781 (Mar. 30, 2020). According to the claim, there was a breach of fiduciary duty by the stockbroker. The claim also alleges fraud and TCM Securities’ failure to supervise Pellegrino’s actions.
Pellegrino was registered with Taylor Capital Management Inc. between October 2, 2012 and April 17, 2018.
