National investment loss lawyers KlaymanToskes reports broker/investment advisor Luke Johnson (CRD# 3257008) of Legend Capital Group/Coastal Equities has been permanently barred from acting as a broker or associating with a broker-dealer firm by the Financial Industry Regulatory Authority (“FINRA”).
FINRA’s decision comes after Johnson made unsuitable recommendations to nine customers to purchase more than $2.35 million in illiquid alternative investments, including the following:
According to FINRA BrokerCheck, Luke Michael Johnson was previously registered with Coastal Equities, doing business as Legend Capital Group, Inc. from 2012 to 2019 in Scottsdale, AZ. Johnson was also previously registered as an investment advisor with Prime Capital Investment Advisors in 2019, in Overland Park, KS, and with Coastal Investment Advisors from 2013 to 2019 in Wilmington, DE.
Investors that suffered losses with Luke Johnson may be entitled to a financial recovery. Contact Lawrence L. Klayman, Esq. immediately at (888) 997-9956 or lawrence@klaymantoskes.com to discuss your recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
On July 12th, 2023, FINRA’s Department of Enforcement entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) with Luke Johnson, disclosing that he consented to sanctions of a permanent bar from associating with any FINRA member in all capacities.
According to the AWC, while associated with Coastal Equities, Johnson earned more than $132,900 in commissions from illiquid alternative investments recommendations, which FINRA determined were “unsuitable in light of the customers’ investment profiles and because Johnson’s recommendations over-concentrated the customers’ liquid net worth in illiquid and high-risk securities.”
FINRA found that Johnson, or assistants acting at his direction, falsified nine customers’ reported net worth and liquid net worth on their Coastal Equities customer account information forms and the customers’ alternative investment documents, as compared to their actual net worth and liquid net worth.
Further, according to the AWC, Johnson or assistants acting at his direction “also often falsified these customers’ reported risk tolerance, liquidity needs, annual income, and/or their status as an accredited investor, on the customers’ account information forms (new account and account update forms), on the customers’ subscription agreements, and on Coastal’s alternative investment disclosure forms.”
Coastal Equities’ written supervisory procedures allegedly contained a concentration policy that prohibited the firm’s registered representatives from making any recommendation of an alternative investment that caused more than 35% of a customer’s liquid net worth to be invested in alternative investments.
In addition to inflating his customers’ net worth, Johnson allegedly “dramatically understated the percentage of his customers’ assets invested in alternative investments in order to circumvent Coastal’s concentration policy and Coastal’s supervisory oversight.”
From April 2015 to May 2018, Johnson allegedly recommended that Customers A, B, C, D, E, G, H, and I purchase $1,047,000 in GPB Capital related limited partnership interests, including the following four limited partnerships:
The GPB Capital limited partnership interests sold to investors were unregistered securities, sold pursuant to Regulation D under the Securities Act of 1933. As stated by FINRA, as a condition of the offerings, only accredited investors were eligible to purchase these limited partnership interests.
GPB Capital’s Automotive Portfolio Private Placement Memorandum stated that investments in the limited partnerships “ (1) involve ‘significant risks,’ (2) as the securities are illiquid, and (3) ‘are suitable only for persons of substantial financial means who can make a long-term investment, can bear the risk of loss of their entire investment in the Company, and have no need for liquidity in their investment.’”
Further, FINRA found that Johnson recommended a number of other illiquid and speculative alternative investments to Customers A through I, including non-traded shares of the following non-traded REITs:
According to the AWC, Johnson also recommended to Customers A, B, C, D, E, G and I to purchase interests in the following illiquid, high-risk investments:
FINRA found that the offering documents for each of the investments listed above “reflected that they were illiquid and high risk”. As noted by FINRA in its Notice to Members 03-71, alternative investments often have complex terms and features that are not easily understood, making them suitable for recommendation “to only a very narrow band of investors capable of evaluating and being able to bear these risks.”
By making unsuitable investment recommendations, Luke Johnson violated FINRA Rule 2111 (Suitability) and Rule 2010 (Standards of Honor and Principles of Trade). In addition, by falsifying customer account documents and causing information to be inaccurate on Coastal Equities’ account records and alternative investment documents, Johnson violated FINRA Rule 4511 (General Requirements).
Brokers, investment advisors, and their firms are responsible for providing suitable investment advice. They also have a duty to avoid making misrepresentations regarding investment recommendations, and to avoid overconcentrating their customers’ accounts in one particular security or sector of securities.
Former customers of Luke Johnson that suffered losses due to unsuitable alternative investment recommendations may hold their brokerage firm responsible through a FINRA arbitration claim. Contact KlaymanToskes immediately to discuss your recovery options at 888-997-9956 or on the web at www.klaymantoskes.com. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lawrence@klaymantoskes.com
www.klaymantoskes.com