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Award Date: March 14, 2024
Claimant Representative: Peter Lindholm, J.D., HLBS Law
Respondent Firms: Arkadios Capital and Triad Advisors LLC
Case Objective:
Between 2019 and 2022, a Jacksonville, Florida-based advisor with over 30 years of dedication to the financial services industry collected 5 customer dispute disclosures on his public BrokerCheck record. All five disputes were related to GPB products that had failed through no fault of the advisor. Seeking to restore his perfect record, he hired HLBS Law to guide him through FINRA Dispute Resolution, seeking expungement of all five claims.
Summary:
GPB Capital Holdings, LLC (GPB) offered non-correlated, private equity investments. Among those investments were various LPs. Before 2019, the advisor recommended GPB investments to customers for whom the investments were suitable. The investors purchased the investments and received attractive distribution payments for some time.
However, unbeknownst to both firms and advisors, GPB manipulated its financial statements to give the false appearance that the income earned by GPB companies was greater than it was. GPB issued false financial statements to broker-dealers and prospective investors alike.
In 2018, GPB Investments suspended distributions and redemptions. In May 2020, the State of Massachusetts Securities Division commenced an enforcement action against GPB, alleging, among other things, that GPB was paying investor dividends with contributions made by new investors. In February of 2021, the U.S. Justice Department charged three men, including GPB’s then-chief executive, with fraud in connection with what was described as a $1.7 billion Ponzi-like scheme.
The value of GPB investments dropped, and some lost all of their value. Customers who had invested in GPB investments lodged claims in attempts to recoup their losses.
Four of the advisor’s customers lodged claims, and a fifth claim from an individual who wasn’t even his client was reported to his records. While the advisor was not named in those claims, several allegations were reported to his CRD and public BrokerCheck record, including unsuitability, misrepresentation, negligence, breach of fiduciary duty, violations of the Florida Securities and Investor Protection Act, breach of contract, omission of material facts, and a failure to conduct adequate due diligence. The firms settled four of the five claims ranging from $78K to $250K.
Result:
At the FINRA hearing, neither broker-dealer opposed the advisor’s request for expungement, and none of the customers participated. The FINRA Arbitrator reviewed the settlement documents, pleadings, and exhibits. She listened to Peter Lindholm, J.D.’s arguments, and the advisor’s testimony.
The Arbitrator’s award specifically stated that “The record shows, via [the advisor’s] testimony and documents in evidence, that [he] reasonably relied on the investigations and recommendations by [the firms], and he conducted his own due diligence on the product and its suitability for his clients.” She also noted, “Any subsequent evidence undermining the integrity of the GPB investments was not available before the Customers made their investments.”
The Arbitrator reviewed the information about the customers, which showed that the investments had been deemed suitable for each investor, that the customers received and reviewed thoroughly written documents explaining the investments, and that the advisor had not even been involved in one of the transactions. She concluded that “The evidence strongly supports a finding [that the advisor] had no knowledge of any fraud and did not have any reason to believe the insiders were committing any wrongful or criminal acts at the time of his recommendations.”
With the Arbitrator’s recommendation for expungement of all five disclosures from the advisor’s records, he may now continue his fourth decade in the industry with clear CRD and public BrokerCheck records.
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