FINRA Files Complaint Charging Cantone Research Inc., President Anthony Cantone with Fraud
Alleged Misrepresentations Tied to Christopher Brogdon in Sales of $8 Million in Promissory Notes
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has filed a complaint against Cantone Research Inc. (CRI), of Tinton Falls, NJ, and its President, Anthony J. Cantone (Cantone), charging fraud in connection with the sales and subsequent extensions of more than $8 million of certificates of participation (COP) in five promissory notes. The complaint alleges that, to date, four of the five relevant promissory notes have defaulted, resulting in approximately $6 million in losses to investors. At the same time, CRI and Cantone received fees, commissions and other payments of more than $1 million. Additionally, the complaint charges Christine L. Cantone, CRI's Chief Compliance Officer during the time of the alleged fraudulent misconduct, with failing to supervise Cantone.
According to the complaint, the promissory notes at issue were executed on behalf of one of several entities controlled by Christopher Brogdon, an individual who worked in the assisted living and nursing home industry. Under the terms of the COP sold by Cantone, Brogdon would use investors' funds to purchase and/or redevelop a nursing home, assisted living facility or other real-estate that he controlled. In return, investors were promised 10 percent interest in addition to the return of their principal. The complaint alleges that at the time that CRI and Cantone solicited investors to purchase the COP, and later, when CRI and Cantone extended certain of the COP, CRI and Cantone either misrepresented or failed to disclose material information to investors that cast substantial doubt on Brogdon's ability to successfully make the required principal and interest payments.
FINRA alleges that CRI and Cantone misrepresented and/or failed to disclose material facts to investors and prospective investors, including that:
- Brogdon had twice been barred from the securities industry, once for "egregious misconduct" involving unauthorized transactions, and later for a separate "scheme" involving financial misconduct;
- Brogdon had been indicted for racketeering, theft and Medicaid fraud;
- Brogdon had been found liable for breaching a stock repurchase guarantee agreement; and
- several entities controlled by Brogdon had filed for bankruptcy.
In addition, the complaint alleges that on numerous occasions, Brogdon (and/or an entity under his control) breached the terms of the promissory notes by failing to make a required principal or interest payment. However, instead of informing the COP investors of these defaults, CRI and Cantone attempted to conceal the defaults from investors by, among other things, secretly "covering" the interest payments on Brogdon's behalf. CRI and Cantone continued to solicit new COP investors after one or more of these defaults without disclosure to prospective investors.
The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014, members of the public used this service to conduct 18.9 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.