Louis Karl Kittlaus, a registered representative with Wall Street Strategies, Inc., was suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity, fined $25,000, and ordered to requalify by examination in order to become registered in any capacity in the securities industry according to an Extended Hearing Panel Decision by Financial Industry Regulatory Authority (FINRA) which contained findings that Kittlaus made false, exaggerated, unwarranted, and misleading statements in communications he distributed to the public. Department of Enforcement v. Kittlaus, No. 2012033508702 (Sept. 15, 2015).
According to the Decision, in July, 2012, an individual by the name of RR received a letter from Kittlaus containing an attachment that described an alternative investment in GWG Renewable Secured Debentures. RR reportedly never previously knew of Kittlaus or his company, Alternative Investments Company. RR, according to the Decision, forwarded the letter to FINRA’s Department of Enforcement out of concern for violations of FINRA’s advertising rules.
The letter, according to the Decision, contained a pitch for alternative investments stating Warren Buffet and other financial experts thought bonds were headed for a bear market, that for 32 years Kittlaus had guided investors into alternative investments (which included senior citizens’ insurance policies that were no longer wanted), that a seven year investment would pay 12.86% annually, that a $100,000.00 investment guaranteed by $500,000,000.00 in assets would become $189,000 in seven years, and that switching to alternative investments will increase current income, eliminate risk of daily fluctuation, and create a more predictable financial future.
The Decision indicated that the debentures, which Kittlaus claimed were secured by life insurance policies, was false because the policies were not collateral for the debentures and the secured interest that the debentures had was actually subordinate to other creditors of the issuer’s securities.
FINRA found that Kittlaus’ letter was not fair and balanced, according to the Decision. FINRA stated that the letter did not disclose in a balanced manner the risks and rewards of the investment, which is required by NASD Rule 2210(d)(1)(A). Further, FINRA found that the letter promised significant financial gain without disclosing risks which could include financial loss. FINRA found the letter did not give a reader a legitimate basis to evaluate the claims being made, in that the rates of return and profit projections were not accompanied by explanations of assumptions in forecasts.
FINRA further found that Kittlaus’ statements regarding the elimination of daily fluctuations and creation of a more predictable financial future, without explaining risks, amounted to exaggerated and misleading statements which implied an unrealistic certainty of positive outcomes. FINRA found that such statements violated NASD Rule 2210(d)(1)(B) in this regard.
Further, FINRA found Kittlaus’ projections of the 12.86% annual returns to be impermissible performance predictions which violated NASD Rule 2210(d)(1)(D), in that there was no mention of risks and explanation of a historical basis for the claims or a general proviso that past results are not guarantees of future performance. FINRA also found that the aforementioned conduct by Kittlaus violated FINRA Rule 2010 for his letter’s failure to be fair and balanced.
This is not the first time that Kittlaus has been subject to discipline. Public disclosure records reveal that on October 30, 1997, Kittlaus was terminated (by discharge) from Cousins Securities Corporation after his firm alleged that he printed and distributed a brochure without the firm’s approval. On November 16, 1998, Kittlaus consented to a $7,500.00 fine by the National Association of Securities Dealers, Inc., via an Acceptance, Waiver, and Consent, in connection with Kittlaus’ conduct with the brochure. Public disclosure records also reveal that Kittlaus is subject to a pending customer dispute from November 17, 2014, in which a customer is requesting $700,000.00 after claiming that the products which Kittlaus selected for investment were unsuitable in light of the customer’s age, investment objectives, and risk tolerance.
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, Esq., 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.
