David Oscar Braeger, of New York, New York, a stockbroker registered with Newport Coast Securities, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon an Office of Hearing Officers Extended Hearing Panel Decision containing findings that he made misrepresentations to customers concerning the status and value of their investments, and misused and converted customers’ funds. Department of Enforcement v. David Oscar Braeger, No. 2015045456401 (Dec. 27, 2017).

According to the Decision, a limited partnership, Rubicon, had been established and controlled by Braeger. Braeger was evidently in charge of the entirety of the company’s investment and operational decisions. During this time, Braeger was also associated with Newport Coast Securities as a principal, where he took part in the marketing of Rubicon through a private offering.

The Decision stated that in July of 2009, customers SE and TH had been solicited by Braeger to make an investment in Rubicon. Apparently, SE was instructed by Braeger to make the check payable to Rubicon despite having knowledge that it should have been written out to an escrow agent responsible for holding customers’ funds. Apparently, SE provided a subscription agreement to Braeger accompanied with a check made payable to Rubicon. Braeger then endorsed SE’s check and deposited it at a bank which Braeger utilized to conduct his banking for himself and Rubicon. Yet, the customers’ funds were never located after deposit.

Apparently, Braeger claimed that SE’s check and subscription agreement had been sent by him to Rubicon’s California headquarters, but Rubicon never recorded that it received the subscription agreement and check. Moreover, the firm indicated that there was no record that SE and TH made any investment in Rubicon.

Despite this, quarterly statements had been sent to SE and TH by Braeger for about a year after Braeger was provided with the check, where those statements represented that SE and TH had an account value even though there was no investment in Rubicon. The Decision stated that the investment fund was closed in 2010, and Braeger later instructed Rubicon’s clearing firm to send the proceeds of trading accounts to his bank. Apparently, SE and TH were never made aware about the closing of the Rubicon fund, and they were never provided with their funds at the time that Rubicon dissolved.

According to the Decision, SE and TH continued to be exposed to Braeger’s misleading representations, leading the customers to conclude that their investment in Rubicon was ongoing. Braeger reportedly made oral and written misrepresentations to SE and TH, sending them bogus K-1 documents for tax return formalities. Apparently, the documents reflected that the customers still maintained an account value. However, the customers reportedly detected that they had been deceived by the time they sought a Schedule K-1 for 2014.

SE and TH consequently brought a complaint to FINRA’s attention in May of 2015. FINRA ultimately found that Braeger’s misleading and false statements and ongoing concealment of his improper conduct, coupled with his conversion of $30,000.00 belonging to SE and TH, was conduct violative of FINRA Rules 2010, 2150(a) and NASD Conduct Rule 2330(a).

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