Registered Representative Cesar Rodriguez Barred for Fraud and Improper Use of Customer Funds
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that Avenir Financial Group, its CEO Michael Clements, and registered representative Karim Ibrahim aka Chris Allen consented to an order halting further fraudulent sales of equity interests in the firm and promissory notes pending a hearing on fraud charges relating to the same offerings. The sales, which occurred from October 2013 to the present, were often to elderly customers of the firm, and the respondents' capital-raising practices were continuing. FINRA obtained the order based on its concern regarding ongoing customer harm and depletion of investor assets prior to the completion of a formal disciplinary proceeding against the firm and these individuals. FINRA also permanently barred registered representative Cesar Rodriguez from the securities industry for fraud and for improperly using $77,000 of investor funds for personal expenses in a related offering.
Avenir is a New York, NY-based full-service broker-dealer. During its three-year operation as a FINRA member firm, Avenir and its branch offices have raised over $730,000 in 16 issuances of equity or promissory notes. Most of these sales of equity and promissory notes were to elderly customers of the firm.
In its related underlying complaint, FINRA charges that Avenir, Clements and Ibrahim committed fraud in the sale of equity or promissory notes of the firm, and that Clements aided and abetted the fraud. FINRA specifically alleges that in November 2013, Avenir and Ibrahim defrauded a 92-year-old investor by failing to disclose that Avenir was in dire financial condition at the time they sold a 5 percent equity interest in the firm to him for $250,000. FINRA alleges Ibrahim was aware of the firm's financial difficulties because his unfunded margin trading on behalf of another customer led to a $196,000 margin call and a request by Clements for all Avenir representatives to raise money. FINRA further charges that Clements aided and abetted that fraud by instructing Ibrahim regarding the sale price and also on how he should characterize the offering. In the complaint, FINRA charges that in connection with that same sale, Avenir and Clements defrauded the same elderly investor by providing him with a misleading purchase agreement offering a 5 percent interest in the firm for $250,000. FINRA alleges that the document was misleading because it omitted material information that a few weeks earlier, Avenir offered ownership to other investors at materially different terms; other investors paid significantly lower prices for their ownership interest and there was no basis for the changes in price. Avenir continues to face financial challenges and continues to attempt to raise revenue through equity offerings.
In addition, FINRA alleges that Avenir, through Rodriguez, defrauded six investors, many of whom are elderly, in an Avenir branch office Rodriguez owned. In its complaint, FINRA charges that Avenir, through Rodriguez, misrepresented that $173,800 in proceeds from purchases of equity or promissory notes would be used for general operating expenses and instead, Rodriguez improperly used $77,000 of the proceeds for personal expenses, including jewelry, shoes and toys. FINRA alleges that Clements aided and abetted this fraud because he advised Rodriguez that personal use of investor funds was acceptable.
In settling this matter, Rodriguez neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Under FINRA rules, the individuals and firms named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible sanctions include a fine, an order to pay restitution, censure, suspension or bar from the securities industry. 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.
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.
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.