Walter Francis Grenda, Jr., of Buffalo, New York, a stockbroker with Mid Atlantic Capital Corporation was barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any and all capacities per an Order Accepting Offer of Settlement containing findings that he engaged in fraudulent omissions and misrepresentations, engaged in improper loans from the firm’s customers, and provided false testimony to FINRA in their investigation into Grenda’s alleged misconduct. Department of Enforcement v. Dembski, et al., No. 2013036168701 (Feb. 11, 2016).
According to the Order, between March 1, 2011 through March 1, 2012, investors of Mid Atlantic Capital Corporation were fraudulently induced by Grenda to make an investment in Prestige Wealth Management Fund, LP. The Order stated that Grenda engaged in omissions and misrepresentations regarding Prestige, a speculative growth Fund, leading the investors to believe that the Prestige Fund contained certain attributes which could afford investors protection against loss.
Grenda, according to the Order, told the customers the Fund’s stop-losses and other risk protections were incorporated via a computer algorithm. Yet, the Fund was controlled entirely via Chief Investment Officer, SMS, who was not required to implement the algorithm. Investors were apparently not made aware of this. The Fund subsequently lost in excess of eighty percent of its value in December 2012. Yet, the Order indicated that Dembski previously informed his customers that via the stop-loss element, the Fund’s losses would not be in excess of one percent.
According to the Order, prospective investors received from Grenda a confidential private placement memorandum regarding Prestige that was found by FINRA to have contained misrepresentations concerning the professional expertise of SMS. The Order indicated that no portfolio of securities was ever managed via SMS, despite the private placement memorandum stating that a $500,000,000.00 portfolio was co-managed by them. Additionally, the Order indicated that there was no investment company that SMS was ever the vice president of, despite the private placement memorandum indicating SMS was a vice president regarding an investment company based in New York.
The Order indicated that with respect to investors SS, RH, and SA, Grenda made material misrepresentations. Grenda reportedly told the investors false statements concerning how the fund worked, how the fund was tested, and in the process, failed to relay relevant information regarding trading costs, account fees, or the risks associated with SMS when executing a formula for trades. The Order stated that Grenda told investors that the fund was not risky considering the stop-loss factor.
Grenda reportedly failed to state to investors SS, RH, and SA that the fund was speculative, that SMS was not obligated to follow the algorithm which Grenda stated promoted safeguards, and that there was no limit as to the extent of the fund’s losses. Given Grenda’s conduct, he was found by FINRA to have willfully violated Securities Exchange Act Section 10(b), Rule 10b-5, and FINRA Rules 2010, 2010, and NASD Conduct Rule 2370.
The Order further indicated that Grenda had borrowed funds from customers in September 2009 and March 2010, while Grenda was associated with Wall Street Financial Group, Inc. Grenda reportedly failed to seek and obtain written approval from Wall Street Financial Group regarding the loans.
The Order subsequently stated that Grenda participated in an on-the-record interview with FINRA, pursuant to Rule 8210. FINRA reportedly asked Grenda whether he had ever borrowed funds from a customer, which Grenda denied ever doing. Grenda was subsequently provided with documents pertaining to customer AW, which contained information about a loan that was provided to Grenda from such customer. Grenda, according to the AWC, then admitted to AW’s loan and proceeded to lie about when such loan was repaid.
The Order indicated that Grenda was also presented with the FINRA investigation documents which reflected a loan for $200,000.00 that a trust provided Grenda. When questioned about whether Grenda borrowed money in this regard, he denied doing so. FINRA found that Grenda factually had borrowed the $200,000.00 in funds and has yet to repay the trust.
Grenda was found to have violated FINRA Rule 2010 and NASD Conduct Rule 2370 as a result of his borrowing from firm customers without gaining approval for such. Grenda was also found, according to the Order, to have violated FINRA Rules 8210 and 2010 for making statements that were false to FINRA in the course of Grenda’s testimony.
Public disclosure records via FINRA’s BrokerCheck reveal that Grenda has been subject to six disclosure incidents. On March 28, 2005, a customer received an award/judgment against Grenda and was granted $115,000.00 after claiming unsuitable recommendations, excessive commissions and fees concerning equities and variable annuities, along with misrepresentations. On October 3, 2005, Grenda settled a customer dispute for $47,500.00 after Grenda was alleged by the customer to have made unsuitable trades and investments when Grenda was in the capacity of successor financial advisor.
On July 21, 2006, Grenda settled a customer dispute for $18,475,00.00 after a customer alleged unsuitable recommendations, unjustifiable fees and commissions, and misrepresentations. On December 10, 2014, Grenda was subject to a Cease and Desist Order from the United States Securities and Exchange Commission in connection with the aforementioned allegations, in which the SEC alleged violations of Section 10(b) of the Exchange Act and Rule 10b-5, Securities Act Section 17(a), and Investment Advisers Act Sections 206(1) and 206(2) were committed after Grenda made fraudulent misrepresentations and commissions. In the Matters of Reliance Financial Advisors, LLC, et al., File No. 3-16311 (Dec. 10, 2014). FINRA filed a parallel Complaint against Grenda on December 10, 2014, leading to the aforementioned Order barring Dembski.
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