FINRA Bars Two Brokers for Fraudulent Sales of a Hedge Fund
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has barred two Buffalo-based brokers – Timothy S. Dembski and Walter F. Grenda – from the securities industry for fraud in connection with the sale of a hedge fund, the Prestige Wealth Management Fund, LP. Dembski and Grenda's misconduct occurred while they were employed with Mid Atlantic Capital Corporation.
FINRA's investigation found that Dembski and Grenda made material misrepresentations and omissions to lead investors to believe that the hedge fund was a "growth" fund that would be based on a computer algorithm that automatically included risk protections and stop-losses to limit losses in the fund. In fact, the fund was a highly speculative investment, the fund's Chief Investment Officer had complete control over the investments made, and it was not obligated to follow the computer algorithm. In the last full month that the fund traded, it lost over 80 percent of its value.
Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement, said, "In 2015, FINRA barred nearly 500 brokers from the securities industry and we will continue to root out those brokers who seek to take advantage of their customers."
FINRA found that when marketing the hedge fund, Dembski and Grenda distributed a Private Placement Memorandum (PPM) that they knew contained material misrepresentations about the Chief Investment Officer's professional experience. The PPM stated that the Chief Investment Officer had "worked in the financial services industry for over 14 years," "co-managed a portfolio of over $500 million" and was a "Vice President of Investments for a New York based investment company," all of which were false.
In settling this matter, Dembski and Grenda neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
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 2015, members of the public used this service to conduct 71 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.