South Florida Arbitration & Litigation Lawyer Blog
FINRA Real Estate Investment and Private Placement Fraud Attorney, Russell L. Forkey, Esq.
July, 2011:
David Allen Naefke (CRD #1349960, Registered Representative, Palm Beach Gardens, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Naefke consented to the described sanction and to the entry of findings that he circumvented his member firm’s guidelines regarding investing in illiquid investments by submitting documents, including illiquid investment letters and account information forms, that falsified and exaggerated customers’ net worth which in turn permitted investments in amounts that the firm would have otherwise prohibited and that were unsuitable for the affected customers. The findings stated that the firm had internal guidelines that limited the amounts customers were permitted to invest in illiquid investments; the internal policy further stated that illiquid investments for older investors required additional review and consideration pertaining to their needs for liquidity and income. The findings also stated that Naefke submitted documents that knowingly falsified customers’ net worth, causing his firm’s books and record to be inaccurate and customers to invest in illiquid investments in amounts that his firm would have otherwise prohibited; and Naefke impeded his firm’s ability to adequately supervise the suitability of his recommendations. The finding further stated that on three illiquid investment letters, Naefke falsely stated that a 50-year-old customer’s adjusted net worth was $2,000,000, when in fact it was about $150,000; on at least two account information forms, Naefke falsely stated that an 87-year-old customer’s net worth was between $1,000,000 and $2,999,999, when, in fact, it was approximately $250,000; and on four illiquid investment letters, Naefke falsely stated that the 87-year-old customer’s adjusted net worth was $1,000,100. The findings also included that Naefke recommended and sold illiquid investment interests in publicly registered non-traded real estate investment trusts (REITs), direct participation programs and a limited partnership to customers totaling about $299,000. FINRA found that when Naefke made the recommendations and sales, he did not have reasonable grounds for believing that the recommendations were suitable based on each customer’s other security holdings, financial situation and needs. (FINRA Case #2009016728501)