Megurditch Mike Patatian (also known as Mike Patatian) a stockbroker formerly registered with Westlake International Securities Inc. has been charged by Financial Industry Regulatory Authority (FINRA) with making unsuitable recommendations of real estate investment trusts to customers of Western International Securities. Department of Enforcement v. Megurditch Patatian Disciplinary Proceeding No. 2018057235801 (Feb. 26, 2021).
According to the Complaint, between 2013 and 2017, during the period that Patatian was associated with Western International Securities, he recommended on at least 81 occasions that customers buy non-traded real estate investment trusts (non-traded REITs). The regulator indicates that 59 customers received these recommendations at a time when the stockbroker neglected to have an adequate basis to make the recommendations to anyone.
FINRA alleges that Patatian possessed no reasonable understanding of non-traded real estate investment trust risks and features. He supposedly failed to undertake due diligence to ensure that he comprehended the basic features of those products prior to telling customers to buy them.
The Complaint states that customers of Patatian had liquidity needs but were told to purchase products that did not provide for illiquidity. The regulator indicates that customers’ needs and financial situations rendered the stockbroker’s recommendations unsuitable.
Customers were also allegedly instructed by Patatian to sell their variable annuities to obtain the necessary funds for investing in non-traded REITs. FINRA contends that when these recommendations were made, the stockbroker did not comprehend the consequences relating to variable annuity surrenders. He supposedly lacked an understanding of the fees and taxes associated with these surrenders, making his recommendations of using variable annuity proceeds to purchase non-traded REITs unsuitable.
FINRA also alleges that between 2017 and 2018, six variable annuity exchanges had been recommended by Patatian when he did not understand the negative aspects of making the exchanges. The regulator contends that one of the major cons in these exchanges was that customers would be required to pay more for new annuities.
The stockbroker is also accused by FINRA of having falsified information on customer disclosure forms and account forms. Patatian supposedly made it seem in those documents that customers had several years of investment experience and that they maintained a higher net worth. FINRA indicates that customers were only allowed to invest up to ten percent of their net worth into real estate investment trust products. The net worth of these customers had been inflated by Patatian so that he could get around these limitations.
FINRA contends that Patatian’s unsuitable recommendations of non-traded REITs were violative of FINRA Rules 2010 and 2111. His recommendations regarding annuities were allegedly violative of FINRA Rules 2010 and 2330(b). The Complaint also alleges that the stockbroker’s false statements in customers’ documents were violative of FINRA Rules 2010 and 4511.
Patatian has been referenced in nine customer initiated investment related disputes concerning accusations of his bad sales practices while registered with securities broker dealers including Cuso Financial Services and Western International Securities. FINRA Public Disclosure confirms that a customer filed an investment related complaint concerning Patatian’s activities where they sought $23,000.00 in damages founded on allegations of misrepresentation and unsuitable variable annuity recommendations.
On July 17, 2017, another customer filed an investment related complaint regarding Patatian’s activities in which they requested $9,900.00 in damages founded on accusations that bad advice was provided by Patatian concerning exchange traded funds and this caused the customer to experience damages. On September 18, 2017, an additional customer initiated investment related complaint involving Patatian’s conduct was resolved for $30,000.00 in damages supported by allegations that investment recommendations were not suitable as it pertained to real estate securities purchased through Patatian at Western International Securities.
The stockbroker is also the subject of a customer initiated investment related written complaint on July 30, 2018 where the customer sought compensatory damages founded on accusations that they were not provided with important information concerning the liquidity of their investments.
Patatian’s registration with Western International Securities has been terminated as of April 2, 2020. He was registered with Supreme Alliance LLC between May 8, 2020 and March 4, 2021.