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FINRA Accuses Broker of Charging $11 Million in Commissions and Lying About It

By George C. Miller, Esq.  of Shustak Reynolds & Partners, P.C. posted on Wednesday, February 10, 2016.

In early February 2016, the Financial Industry Regulatory Authority (FINRA) filed an enforcement action accusing financial advisor Gopi Vungarala of repeatedly lying to his customer, a Native American tribe, about substantial commissions associated with the investments he recommended. Vungarala was employed by the tribe as its Treasury Investment Manager and participated in decisions regarding the tribe’s substantial investments. He also was a registered representative of Purshe Kaplan Sterling Investments (PKS), a FINRA regulated brokerage firm. 

According to the FINRA complaint, Vungarala fraudulently induced the tribe to invest approximately $190 million in non-traded real estate investment trusts (REITs) and business development companies without revealing that he and PKS would receive millions of dollars of commissions in connection with those investments. FINRA claims Vungarala knew the tribe prohibited employees such as himself from engaging in business activities that would constitute a conflict of interest and falsely represented to the tribe that he would not receive any commissions in connection with the investments. In total, the investments Vungarala recommended yielded $11.4 million in commissions for PKS, $9.6 million of which was paid to Vungarala. FINRA further alleges PKS failed to appropriately supervise Vungarala and failed to detect and prevent his alleged fraud. 

Non-traded REITs and other private placement investments often carry high commissions and are not suitable for all investors. Shustak Reynolds & Partners has extensive experience representing high-net-worth investors, including Native American tribes, in FINRA Arbitration claims involving fraud, unsuitable investment recommendations and other stockbroker malpractice and financial advisor wrongdoing. Please contact us today for a confidential analysis of your situation. 

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