Ridgeway & Conger, Inc., stockbrokers Kenley Brisard and Philip Brisard, and the firm’s president Leigh Garber, all located in Woodstock, New York, were charged by the Financial Industry Regulatory Authority (FINRA ) in a nine count Complaint containing allegations of fraudulent misrepresentations and omissions of material fact in connection with customer purchases (Kenley and Philip Brisard); fraudulent misrepresentations and omissions of material fact in connection with offers of an SBA interest-only security (Kenley and Philip Brisard); charging excessive markups in the sale of an SBA interest-only security (Ridgeway & Conger); fraudulent failure to disclose excessive markups in the sale of SBA interest-only security (Ridgeway & Conger); negligent failure to disclose excessive markups (Kenley and Philip Brisard); sale of unregistered securities in violation of Section 5 of the Securities Act (Ridgeway & Conger, Kenley and Philip Brisard); and failure to supervise (Ridgeway & Conger and Garber). Department of Enforcement vs. Ridgeway & Conger, Inc., et al., No. 2010022046101 (Jan. 12, 2016).
According to the Complaint, from June through August 2010, all of the named respondents were alleged to have engaged in the sales of securities that were unregistered and which were comprised of interest-only strips from certain loans that had been issued via United States Small Business Association. The Complaint stated that these unregistered securities were only meant to be purchased by qualified institutional buyers. The respondents reportedly sold such unregistered securities that contained undisclosed markups which ranged from fourteen to thirty-three percent, and marketed the products by way of generalized emails that were solicited to investors that had contained fraudulent misrepresentations of both the products and the role that each respondent had concerning its development.
The Complaint indicated that Kenley and Philip Brisard, both of whom were stockbrokers at the firm, allegedly violated Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, along with FINRA Rules 2010 and 2020 as a result of inducing five of the firm’s customers to purchase the unregistered security. Pleading in the alternative, the Complaint alleged that by violating Securities Act of 1933 Sections 17(a)(2) and (3), Kenley and Philip Brisard violated FINRA Rule 2010 by negligently making material misstatements.
The Complaint additionally alleged that Kenley and Philip Brisard violated FINRA Rule 2010 as a result of their failure to abide by Securities Act of 1933 Section 17(a)(1) via transmitting (to an estimated one hundred fifteen additional prospects and customers) e-mails which contained fraudulent and false statements. Pleading in the alternative, the Complaint alleged that Kenley and Philip Brisard violated FINRA Rule 2010 as a result of their noncompliance with Securities Act of 1933 Sections 17(a)(2) and (3) via their negligence in the course of making material misstatements in these generalized e-mails.
Further, the Complaint alleged that the firm had violated FINRA Rule 2010 along with NASD Rules 2440, IM-2440-1 and IM-2440-2 via five of the firm’s customers (of the unregistered securities) being excessively charged markups that ranged from fourteen to thirty-three percent. According to the Complaint, the firm violated FINRA Rules 2010 and 2020, along Exchange Act Section 10(b) and Rule 10b-5 as a result of the firm’s fraudulent conduct pertaining to failing to disclose such excessive markups within the customers’ trade confirmations.
FINRA additionally alleged that Kenley and Philip Brisard, along with their firm, had marketed and sold the aforementioned unregistered securities without any exemption, and as such, violated FINRA Rule 2010 through their noncompliance with Section 5 of the Securities Act.
Garber was reportedly the firm’s president and chief executive officer. The Complaint stated that Garber’s capacity with the firm was designated supervisor of markups and private placements. Garber reportedly signed the internal trade tickets along with approving excessive markups. Garber allegedly approved the firm’s sales of the unregistered securities notwithstanding such unregistered securities violated Section 5 of the Securities Act.
Three months prior to the aforementioned sale of the unregistered securities to the firm’s individual investors, Garber represented to the placement agent that the qualified institutional buyers, not individual investors, would be sold the Rule 144A security. Yet, Garber allegedly provided written approval for the individual customers to be sold the security.
Moreover, FINRA has alleged in the Complaint that the firm had inadequate supervisory procedures and systems associated with the purchase and sale of Rule 144A Securities. This, according to FINRA, did not stop the firm from engaging in such business of purchasing and selling the securities.
Finally, FINRA alleged that Garber and the firm had violated FINRA Rule 2010 along with NASD Rules 3010(a) and (b) via the failure to establish and uphold the necessary level of supervisory systems and protocol pertaining to 144A Securities, in addition to Section 5 activities regarding interest-only unregistered security sales, and markups.
Public disclosure records via FINRA’s BrokerCheck reveal that Kenley Brisard has been subject to six disclosure events. On October 12, 1998, Kenley Brisard was discharged from National Securities Corporation amid allegations that a branch compliance officer witnessed Kenley Brisard, while in the course of a phone conversation, representing himself as American Express’ chief executive officer. He was also alleged to have made misrepresentations pertaining to a client’s confidential information. On January 3, 2002, Kenley Brisard was named in a customer dispute where a customer was granted $27,500 after alleging violations of suitability, along with a claim of omissions and misrepresentation of material fact. Kenley Brisard has also been subject to three civil judgments/liens from 1995 through 2010.
Public disclosure records via FINRA’s BrokerCheck reveal that Philip Brisard has been subject to six disclosure events. On July 30, 2001 Phillip was named in a customer dispute which was settled for $27,500 amid allegations that he engaged in excessive use of margin, churning, and the misrepresentation of material facts. On March 16, 2009, Phillip Brisard settled another customer dispute for $10,000 after the customer alleged misappropriation as well as unauthorized transactions.
Public disclosure records reveal that Leigh Garber has been subject to two disclosure incidents. On August 1, 2005, Garber was sanctioned and fined $5,000 by the National Association of Securities Dealers (NASD) after consenting to findings that he violated NASD Membership and Registration Rules 1021, 1031, and NASD Conduct Rule 2110 in connection with permitting an individual to maintain securities licenses when not actively involved in the firm’s securities or investment banking business, while also permitting such individual to act as the firm’s finance and operations principal even though the individual had inactive registration status with NASD.
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