Reuters: Regulatory News: UPDATE 1-Texas broker-dealer expelled by FINRA hearing officer

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UPDATE 1-Texas broker-dealer expelled by FINRA hearing officer Apr 25th 2012, 18:52 Wed Apr 25, 2012 2:52pm EDT By Ashley Lau April 25 (Reuters) - Pinnacle Partners Financial Corp was expelled from FINRA by a regulatory hearing officer on Wednesday after the Texas-based broker-dealer and its president were found to have raised $10 million through fraudulent sales. Pinnacle lost its membership to the Financial Industry Regulatory Authority, the retail brokerage industry's self-watchdog. The company's president, Brian Alfaro, was also barred from associating with any member firm for any reason, the hearing officer determined. Alfaro was also found to have used some customer funds for unrelated personal and business expenses, the officer said. FINRA said that from August 2008 to March 2011, Pinnacle and its president raised $10 million from more than 100 investors in a boiler-room operation that involved the sale of fraudulent offerings. Alfaro and Pinnacle operated a boiler room involving about 10 brokers who placed "thousands of cold calls" on a weekly basis to solicit investments in oil and gas drilling ventures that Alfaro owned or controlled. The officer also found that Pinnacle misrepresented 11 of its private placement offerings by grossly inflating natural gas prices, reserve projections, gross returns and monthly cash flows. Pinnacle and Alfaro deleted unfavorable information from well operator reports and showed maps that omitted faulty wells near projected drilling sites, the officer said. "We've always operated with transparency and professionalism," Alfaro said in an interview on Wednesday. Alfaro said he does not expect the decision to have any bearing on his firm's oil and gas ventures. "We don't sell securities, we sell joint ventures, so (the decision) doesn't impact us in any shape or fashion," Alfaro said. As restitution, Pinnacle and Alfaro have been ordered to rescind the contracts for investors who were sold fraudulent offerings and to refund all sales commission to those customers who do not request rescission. Link this Share this Digg this Email Reprints

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