Avenir Financial Group, of New York, New York as well as its chief executive officer, Michael Todd Clements and stockbroker Karim Ahmed Ibrahim, were all censured by Financial Industry Regulatory Authority (FINRA) in connection with a FINRA Office of Hearing Officers’ Extended Hearing Panel Decision which contained findings that the firm, Clements, and Ibrahim engaged in securities fraud. Department of Enforcement v. Avenir Financial Group, et al., No. 2015044960501 (Sept. 20, 2016).
According to the Decision, Avenir Financial Group was fined $229,000.00, received a two-year suspension from effecting self-offerings, and was ordered by FINRA to provide rescission to investors who were defrauded after the firm was found to have engaged in willful securities fraud, failed to make requisite regulatory filings and other disclosures pertaining to self-offerings, and failed to supervise its securities business.
The Decision also reported that Clements, of Wellington, Florida, was permanently barred from associating with a FINRA member in any capacity, and forced to provide customers who Clements defrauded with rescission after being found by FINRA to have committed willful securities fraud. Ibrahim reportedly received a two-year suspension from associating with any FINRA member in any capacity, was disgorged of his commissions, and forced to relinquish his equity interest in the firm pursuant to a finding that Ibrahim committed willful securities fraud.
The Decision came after a Complaint was filed by FINRA on April 27, 2015, alleging that the firm, Clements, and Ibrahim had defrauded customers in connection with promissory notes and equity sales, most of which were made to elderly customers.
The Decision particularly noted the firm attempted to raise capital by providing customers with one percent interest for each investment of $50,000.00 that the customer’s invested. The Decision stated that customers were not provided with an explanation regarding the pricing of equities, nor the financial status of the firm.
Apparently, a ninety-two-year-old investor, NL, was solicited by Ibrahim to make an equity investment in the firm, which Ibrahim claimed to be a startup company seeking to grow and finance operations. The Decision stated that NL made a $250,000.00 investment in the firm in return for a five percent interest. FINRA found that Ibrahim made a material omission to NL in connection with the purchase.
Particularly, Ibrahim never disclosed to NL that Avenir was dealing with a severe capital crisis after being hit with a margin call amounting to $190,000.00. Ibrahim reportedly failed to indicate to NL that the firm previously had to stop its securities operations for thirteen days due to net capital deficiencies, and was on the brink of again failing to meet the capital regulatory requirements.
The Decision further stated that Ibrahim was directed by Clements to solicit the equity transactions from customers, which included customer NL, under the claim that the funds would be utilized to address the firm’s growth and operations. FINRA found that Clements was aware of the firm’s severe financial situation prior to calling for Ibrahim to generate interest in the firm. Clements was reportedly aware of the firm’s potential failure to meet net capital requirements, and was aware that the firm would be suspended if unable to meet such net capital requirements.
The Decision stated that Clements had actually approved and drafted the purchase agreement for NL’s investment. These aforementioned omissions by Clements, Ibrahim, and Avenir were deemed by FINRA to be violative of Securities Exchange Act Section 10(b), and Rule 10b-5, as well as FINRA Rules 2010 and 2020.
FINRA also found that Avenir, by way of stockbroker Cesar Rodriquez, made misrepresentations to customers, ES, RD, AC, CS, and KK, regarding the plans for investment proceeds pertaining to the sales of debt and equity investments in BRCH. Apparently, Rodriquez represented to customers that the funds from investors would go towards the operating expenses and growth of BRCH, when in fact, the funds were misused by Rodriquez for personal expenses. FINRA found that Avenir was responsible for Rodriquez’s conduct, which was conduct violative of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, and FINRA Rules 2010 and 2020.
FINRA’s Hearing Panel also found that Avenir’s failure to provide written disclosures to investors concerning the selling compensation received by the firm and staff, the use of proceeds, and the failure to provide FINRA with required filings in connection with the equity self-offerings for BRCH was conduct violative of FINRA Rules 2010 and 5122. Avenir and Clements were also found by FINRA to have violated FINRA Rules 3010(b) and 2010 in connection with failing to adequately supervise the capital raising conduct of Avenir and BRCH.
According to FINRA’s BrokerCheck, Michael T. Clements has been subject to four customer disputes. Particularly, on January 7, 2016, Clements became subject to a pending customer dispute, in which the customer has requested $225,000.00 in damages after alleging that Clements engaged in the unauthorized trading in the customer’s account, and that the customer never received accounting or trade confirmation statements in connection with such.
On January 14, 2016, Clements became subject to a pending customer dispute, in which the customer has requested $110,000.00 in damages after alleging that Clements churned the customer’s account, gained excessive commissions, and made unsuitable investment recommendations. On February 23, 2016, Clements settled a customer dispute for $255,000.00 after a customer alleged that Clements engaged in unsuitable investment recommendations which caused the customer investment losses.
On August 23, 2016, Clements was named in a pending customer dispute, in which a customer requested $25,000.00 in damages after alleging that Clements committed fraud, theft, and failed to supervise.
According to FINRA’s BrokerCheck, Karim Ibrahim has been subject to four customer disputes. On October 29, 2013, Ibrahim settled a customer dispute for $242,000.00 after being alleged to have engaged in the unauthorized purchase of equities. On March 11, 2014, Ibrahim became subject to a customer dispute, where the customer requested $57,200.00 after he was alleged to have made unauthorized trades in the customer’s account.
On February 3, 2015, Ibrahim became subject to a pending customer dispute, in which the customer requested $1,000,000.00 in damages after alleging that Ibrahim churned the customer’s account, engaged in unsuitable and unauthorized transactions, failed to supervise, breached his contract and fiduciary duty with the customer, charged excessive commissions, and defrauded the customer.
On June 3, 2015, a customer lodged a dispute against Ibrahim, in which the customer requested $536,180.09 in damages in connection with allegations against Ibrahim of breach of fiduciary duty and contract with the customer, churning, misrepresentations, and unauthorized and excessive trades in the customer’s account.
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