The National Adjudicatory Council for the Financial Industry Regulatory Authority (FINRA) just upheld a Hearing Panel Decision to bar Fuad Ahmed from associating with any FINRA member firm in any capacity as well as upholding the expulsion of his firm, Success Trade Securities, after finding that the respondents willfully engaged in securities fraud and selling unregistered securities without an exemption. In the Matter of Department of Enforcement v. Ahmed et al., No. 2012034211301 (Sept. 25, 2015).
According to the Decision, from February, 2009 through February, 2013, Ahmed and company offered and sold unregistered, non-exempt transactions that totaled roughly $20,000,000 in promissory notes to at least sixty-five investors. The Decision indicated that most of the investors were customers of the broker-dealer and advisory clients of an investment advisor whose employees were registered representatives associated with the broker-dealer and that offered and sold notes to clients.
A private placement is generally the offer or sale of unregistered securities that are not the subject of a registration statement filed with the United States Securities and Exchange Commission pursuant to the Securities Act of 1933.The subject of a private placement is only limited by one’s imagination, and can include real estate, common stock, warrants, bonds, hedge fund interests, orange groves, timberland, tax liens, structured settlements, Ponzi schemes, or simply fraudulent promissory notes or promises to pay by your broker.
In some cases, however, investors do not purchase private placements on their own initiative, investors are sold or recommended private placements by their stockbrokers or investment professionals, sometimes with, or most often without the knowledge or approval of their brokerage firm. In many cases, these brokerage firms are responsible for these unapproved activities under a variety of legal theories including vicarious liability as the agent or employee of the brokerage firm, as a control person of the broker, or based upon the brokerage firm’s failure to supervise the activities of its registered representatives or stockbrokers.
Ahmed and company reportedly misappropriated proceeds from the private placements to pay Ahmed’s personal expenses, remit expenses to Ahmed’s brother, and fund the investment advisor’s payroll and operations. Further, the Decision indicated that the company and Ahmed would use the proceeds from note sales to make interest payments to earlier noteholders, which in turn perpetuated the fraud.
According to the SEC’s Admin Release 33-9891/34-75707/Investment Company Act Release 31762 from August 14, 2015, in late 2012 and early 2013, the organizations and Ahmed fraudulently induced noteholders to convert or extend their notes before the scheme collapsed in April 2013. The SEC alleged Ahmed to have willfully violated Sections 5(a) and (c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5.
The National Adjudicatory Council Decision imposed sanctions for the unregistered securities sales, despite an earlier decision in which FINRA’s Hearing Panel did not. The Decision stated that the unregistered securities sales executed by Ahmed and Success Trade Securities furthered the fraud, supported their joint efforts to evade detection and regulatory oversight, and had imposed additional risk on an already speculative investment made by investors.
Public disclosure records reveal that Ahmed has been subject to twelve disclosure incidents in which six involved customer disputes. On May 26, 2013, Ahmed settled a customer dispute for $231,322.38 after allegations of breach of fiduciary duty, negligence, negligent supervision, fraud, violation of Florida’s Securities Investor Protection Act, violations of Sections 12(1) and 20(a) of the Securities Exchange Act, violations of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 of the Securities and Exchange Commission.
In another instance on June 7, 2013, Ahmed settled a customer dispute for $193,988.00 after allegations of failure to observe high standards of commercial honor, negligence, misrepresentation and omission, breach of fiduciary duty, breach of contract, and violation of Colorado’s Securities Act. On September 10, 2013, Ahmed settled a customer dispute for $52,000.00 after allegations of failure to observe high standards of commercial honor, negligent misrepresentation and omission, negligent supervision, fraudulent misrepresentation, breach of contract, and violations of the Securities Act of Kentucky.
Ahmed settled a customer dispute on October 2, 2013, for $36,249.00 after allegations of violations of federal securities laws, violation of VA securities laws, conspiracy pursuant to VA Code 18.2-499 & 500, common law conspiracy, and actual or constructive fraud. On November 7, 2014, Ahmed settled a customer dispute for $291.027.18 after allegations of breach of fiduciary duty, negligence, negligent supervision, fraud, violation of Virginia’s Securities Investor Protection Act, violation of Maryland’s Securities Act, violation of Sections 12(1) and 20(a) of the Securities Exchange Act, violations of 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., 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 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.
