National investment loss lawyers KlaymanToskes reports that SW Financial (a/k/a Salomon Whitney Financial LLC) has been expelled from acting as a broker-dealer in the securities industry by the Financial Industry Regulatory Authority (“FINRA”), due to several violations of FINRA rules, including making misrepresentations to customers related to private placement offerings of pre-initial public offering (pre-IPO) securities, churning customer accounts, and failing to supervise its brokers/advisors.
If you suffered investment losses at SW Financial, contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lklayman@klaymantoskes.com for a free consultation to discuss recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
SW Financial entered into a regulatory agreement known as a Letter of Acceptance, Waiver, and Consent with FINRA’s Department of Enforcement, whereby the firm was expelled from FINRA membership, and from engaging in the sale of securities.
The firm’s co-owner and CEO Thomas Diamante entered into a separate Letter of Acceptance, Waive, and Consent, which suspended him for nine months in all capacities, followed by a three-month suspension in all principal capacities. Diamante was also fined $50,000 and will be required to requalify by examination if he seeks to register with FINRA in the future.
According to SW Financial’s AWC, FINRA found that from at least January 2018 to December 2021, Thomas Diamante and SW Financial made material misrepresentations and omitted material facts in connection with the sale of private placement offerings of pre-IPO securities to customers. FINRA found that SW Financial lied to customers and potential investors by stating that the firm would only receive a 10 percent sales commission in connection with its sale of certain pre-IPO securities.
The firm and its CEO Diamante concealed information from investors about an agreement it entered into with the issuer, whereby SW Financial would receive an additional 5 percent in selling compensation and half of any carried interest. According to FINRA, “Carried interest is a share of profits payable to investment managers rather than investors. Here, the Issuer retained as carried interest 20 percent of any profits following the IPOs of the private companies.”
SW Financial sold the offerings to 171 investors, including 163 retail customers, and the total principal amount of the investments was approximately $21.3 million. The firm received approximately $2 million in undisclosed selling compensation.
SW Financial did not conduct reasonable due diligence before recommending the offerings to customers, and lacked a reasonable basis for making the recommendations. In KlaymanToskes opinion, this conflict of interest should have been fully disclosed to investors, as the undisclosed compensation may have influenced SW Financial’s recommendations to customers.
This misconduct was in violation of several FINRA rules and the SEC’s Regulation Best Interest (Reg BI). Reg BI requires that brokerage firms and their registered representatives provide their customers with full written disclosure of all material facts relating to conflicts of interest associated with the investment recommendation, prior to or at the time of a recommendation.
According to the AWC, “between January 2016 and May 2019, SW Financial, acting through two former registered representatives, churned nine customer accounts, causing the customers to incur more than $350,000 in total trading costs and realized losses of more than $465,000.” SW financial failed to follow up on red flags that indicated its representatives were excessively trading in customer’s accounts.
In one example mentioned by FINRA in the AWC, a 75-year-old customer whose account was excessively traded had a cost-to-equity ratio (or break-even point) of over 103 percent. The customer paid over $100,000 in commissions, and incurred realized losses of over $130,000, causing him to lose the majority of his savings.
KlaymanToskes previously reported that three former SW Financial brokers, Vincenzo E. Trimaldi, David E. Alvarado, and John N. Girgis are facing a pending customer complaint filed by multiple customers, which alleges $10.3 million in collective damages due to unsuitable, unauthorized investments and excessive trading/commissions, as well as negligence. All three brokers were previously registered with SW Financial in New York, NY.
KlaymanToskes believes filing a FINRA arbitration claim is generally the best course of action for investors that have sustained realized or unrealized losses at the hands of their full-service brokerage firms.
FINRA arbitration is usually the most cost-effective process for investors seeking to recover investment losses, often occurring with the added benefit of increased efficiency over a court proceeding.
KlaymanToskes can help you determine if you should bring a FINRA arbitration claim against your brokerage firm and/or financial advisor. Contact attorney Lawrence L. Klayman, Esq., at (888) 997-9956 or lklayman@klaymantoskes.com for a free consultation.
Our firm offers legal services on a contingency fee basis, meaning 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
lklayman@klaymantoskes.com
www.klaymantoskes.com