South Florida Arbitration & Litigation Lawyer Blog
Stock Broker Fraud, Misrepresentation and Negligent Supervision Lawyer, Russell L. Forkey, Esq.
January, 2012:
Michael William Bozora (CRD #28009, Registered Principal, Belvedere, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $50,000 and suspended from association with any FINRA member in any capacity for two years. The fine must be paid either immediately upon Bozora’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Bozora consented to the described sanctions and to the entry of findings that as principal of his member firm, he failed to conduct adequate initial and/or ongoing due diligence in relation to an entity’s private placement offered and sold through his firm. The findings stated that Bozora did not have a reasonable basis for believing the recommendation of the entity’s partners to be suitable for any of the firm’s customers. Bozora failed to obtain sufficient information from individuals solicited to invest in the entity’s offering during the relevant time period to ascertain whether a recommendation to invest in the entity would be suitable for them based upon their financial circumstances and needs. The findings also stated that Bozora’s firm, acting through him, failed to maintain subscription agreements for investors in the entity’s private placement who invested through the firm. The findings also included that Bozora participated in the offer and sale of limited partnership units of an entity he co-founded. Among other things, Bozora provided information about the entity to other broker-dealers for the purpose of facilitating the offer and sale of the entity by those firms; and, in connection with this activity, he distributed, or caused the distribution of, a PPM that contained material misrepresentations and omitted to disclose material facts regarding the entity’s operations and financial condition. The PPM failed to disclose the foreclosure by a company, the company’s default on its obligations to the entity and the subsequent foreclosure by the entity on the properties that secured those obligations. Bozora knew, or should have known, that his entity was using new investor proceeds in part to pay the monthly interest obligations to the entity’s current investors and preferred note holders and not for new investments as represented in the entity’s offering documents. Bozora failed to disclose this material information to those who invested in the entity.
FINRA found that Bozora knew, or should have known, that his entity lacked sufficient revenue from operations to pay its monthly distributions to existing investors, and was funding such payments at least in part with capital raised from new investors. Because new investor funds were being applied to pay earlier investors, Bozora did not have a reasonable basis for believing that the recommendation to invest in the entity’s preferred notes was suitable for any customer. In addition, FINRA determined that Bozora failed to establish and maintain a supervisory system, and to establish, maintain and enforce WSPs reasonably designed to cause the firm to conduct due diligence for new offerings. Moreover, FINRA found that Bozora failed to supervise the activity of its registered representatives selling his entity’s preferred notes. Furthermore, Bozora failed to document ongoing due diligence of his entity and also failed to establish, maintain and enforce procedures regarding the firm’s due diligence review. The suspension is in effect from November 21, 2011, through November 20, 2013. (FINRA Case #2009018816501).