Megurditch Patatian (also known as Mike Patatian), of Westlake Village, California, a stockbroker registered with Western International Securities Inc., has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Patatian made unsuitable recommendations to his customers. In the Matter of Department of Enforcement v. Patatian, Decision No. 2018057235801 (September 28, 2023).
Patatian was found to have violated his reasonable-basis suitability obligation when he recommended non-traded real estate investment trusts (REITs) to customers without understanding their potential risks. It was determined that Patatian recommended these non-traded REITs even though he did not grasp their potential dangers. Moreover, he failed in his customer-specific suitability obligation, as certain customers had specified liquidity requirements, did not want investments that could be illiquid or risky, and yet he advised them to invest a significant portion of their liquid assets into a non-traded REIT.
The findings also highlighted that Patatian made unsuitable recommendations to customers urging them to surrender their variable annuities to acquire non-traded REITs. He did not realize that these surrenders would lead his customers to face notable tax implications. Some customers were inaccurately advised that their surrenders were tax-free 1035 exchanges, leading to more than $67,000 in taxes and fees due to the surrenders. Patatian further made unsuitable suggestions to customers about swapping their variable annuities for new ones based on incorrect cost comparisons, resulting in increased costs and fees for the customers.
In another incident, Patatian impersonated a customer during a call with an insurance firm after advising the customer, a married couple, to surrender a variable annuity for a non-traded REIT. He provided the customer’s personal details during the impersonation. Although Patatian asserted that he had written consent and authority from the customers to inquire about the surrender charge and contract value, no evidence supported his statement.
Furthermore, FINRA found discrepancies in Patatian’s records, where he overstated his customers’ investment experience on the firm’s account forms. He also inflated his customers’ net and liquid net worth on disclosure forms, sometimes shortly after registering considerably lower figures in the new account documents. Patatian admitted to exaggerating his customers’ financial data and investment experience to bypass investment restrictions and secure approval for the non-traded REIT acquisitions.
FINRA found that Patatian violated FINRA Rules 2010, 2111, 2330, and 4511.
FINRA Public Disclosure reveals that Patatian has been identified in nine customer initiated investment related disputes containing allegations of his conduct while employed with securities broker dealers. On July 29, 2016, a customer initiated investment related complaint involving Patatian’s conduct was settled for $492.35 in damages based upon allegations that Patatian did not adequately inform the customer regarding the risks and details of their variable annuity investment when Patatian was associated with CUSO Financial Services LP.
On August 27, 2015, a different customer filed an investment related complaint involving Patatian’s conduct in which the customer requested $11,300.00 in damages based upon allegations that Patatian provided poor recommendations between September 1, 2016, and June 12, 2017, in connection with the sale of exchange traded funds when Patatian was associated with Western International Securities Inc.
On September 18, 2017, a customer initiated investment related complaint involving Patatian’s conduct was settled for $30,000.00 in damages based upon allegations that Patatian gave the customer bad advice in connection with the sale of real estate securities when Patatian was associated with Western International Securities Inc.
Patatian is also referenced in a customer initiated investment related complaint filed on July 30, 2018, in which the customer requested compensation based upon allegations that Patatian did not inform the customer of the liquidity provisions of their real estate security when Patatian was associated with Western International Securities Inc. The complaint was subsequently denied.
Patatian was associated with Supreme Alliance LLC in Charlotte, North Carolina from May 8, 2020, to March 4, 2021, and associated with Western International Securities Inc. in Westlake Village, California from April 5, 2013, to April 2, 2020.
