Red River Securities, LLC., a FINRA member firm from December 8, 2009, from March 5, 2014, operating out of Dallas, TX, employed roughly 14 registered representatives in its broker/dealer capacity. The Firm, along with it’s CEO Brian Keith Hardwick, were charged by FINRA’s Department of Enforcement in a Complaint alleging a myriad of significant violations of FINRA rules and federal securities laws for misrepresentations, omissions of material facts to prospective investors, and engaging in the offer and sale of unregistered sale of securities in connection with joint venture offerings. Dept. of Enforcement v. Halcyon Cabot Partners, Ltd. No. 2013035344201 (Filed July 27, 2015).
The Complaint
According to the Complaint, from December of 2009 to September of 2013, the Firm acted in the capacity of exclusive placement agent in 5 joint venture offerings that were being conducted through non broker/dealer issuer Regal Energy LLC. The Complaint indicates that the Firm and Hardwick accrued roughly $23.9M from at least 447 investors from all over the US for the Real Energy offerings (referred to as Pierce #1, Cosper #1, Waggoner #1, Waggoner #2, and Boonsville #2), where the Firm received 12% commission and an additional 3% for conducting due diligence.
According to the Complaint, the majority of the joint ventures were termed Texas general partnerships and for purposes of engaging in oil and gas drilling located in Barnett Shale. The Complaint indicates that despite such terminology, such ventures were really limited partnerships or securities due to the fact that investors had no true say in enterprises, did not share in revenues/expenses/assets but rather paid for expenses only to receive little to zero return on investment. The Complaint indicated that none of the wells drilled as a result of the Red River ventures returned investors any more than a fraction of their money – and at least 2 of the 5 ventures returned $0.
The Complaint further indicates that Red River and Hardwick made repeated violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, Section 17(a)(2)-(3) of the Securities Act of 1933, and FINRA Rule 2010 due to their misrepresentations and omissions of material facts to the prospective investors. Specifically, the Complaint indicates that Red River and Hardwick misinformed investors as to Pierce #1 and Cosper #1 profitability, expected costs associated with Waggoner #1 and Boonsville #2 (referred to as authorizations for expenditures “AFEs”), misrepresented Boonsvile #2 offering regarding prior investor returns associated with prior wells managed by Regal Energy, and failed to disclose to investors conflicts of interests in the offerings, among other misrepresentations and omissions.
The Complaint further states that Red River and Hardwick violated Section 5 of the Securities Act by engaging in the offer/sale of unregistered securities in connection with Cosper #1 and Boonsville #2; violated NASD Rules 2310 (for conduct occurring prior to July 9, 2012) and FINRA Rule 2111 (for conducing occurring after July 9, 2012) in recommending the aforementioned 5 offerings without first having obtained adequate customer information to determine suitability; and violating NASD Rule 3010 for failing to implement and enforce an adequate supervisory system and WSP’s to supervise the offer/sale of the joint ventures.
Public Disclosure Records
Public disclosure records reveal Red River has been subject to at least 1 prior regulatory event for alleged wrongdoing. On December 9, 2011, the Firm was censured and fined $5,000 in connection with allegations that from January 4, 2010 – May 27, 2010, the Firm negligently failed to disclose material information to customers who invested in oil and gas private placement offerings sold by the firm, while also failing to disclose material information to customers who invested in an oil and gas private placement. FINRA Letter of Acceptance, Waiver and Consent No. 2010021419301 (Dec. 9, 2011).
Public disclosure records reveal that Brian K. Hardwick is subject to at least 2 pending customer disputes alleging wrongdoing . On June 20, 2012, a customer alleged violations of the Texas Securities Act, Texas Deceptive Trade Practices Act, fraud, negligence, negligent misrepresentation and seeks damages of $5,891,625.00. On January 2, 2013, a customer alleged misconduct and is requesting damages of $1,975.70. Public disclosure records also reveal that Hardwick was subject to 1 prior regulatory issue on October 1, 2009, where the State of Colorado alleged that Hardwick’s conduct of engaging in an offer or sale of unregistered securities not subject to exemption was a violation of the Colorado Securities Act.
Guiliano Law Group
Investors suffering losses or damages caused by Red River Securities, LLC. and Hardwick in connection with the aforementioned conduct may be able to recover their investment losses. Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
