The following information was obtained on FINRA’s website’s ‘Disciplinary Actions, February 2012.”
Neal Seth Smalbach (CRD #1459854, Registered Principal, Palm Harbor, Florida)
submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity.
Without admitting or denying the allegations, Smalbach consented to the described sanction and to the entry of findings that he fraudulently misrepresented the risks and omitted material facts, for the sale of an oil and gas private placement
investment to retired, senior citizen customers. The findings stated that Smalbach claimed to have conducted his own due diligence, which included reviewing the PPM, subscription agreement, promotional material and speaking with employees of the issuer and firm due diligence personnel.
These findings also stated that Smalbach told investors that the investment was safe and high-yielding, which was false and misleading, and Smalbach virtually guaranteed his customers a yearly dividend and the return of their principal after three years but omitted telling them that the company had no significant assets, no current cash flow, and no prior operating history which was disclosed in the subscription agreement and PPM.
In addition, FINRA determined that Smalbach’s recommendations were unsuitable to unaccredited customers in light of the customers’ age, limited investment experience, conservative risk tolerance and need for the preservation of principal and also unsuitable for accredited investors because of his misrepresentations and omissions of material fact.
These findings also included that Smalbach’s member firm required customers to complete a client information new account form that asked for customers’ contact information, investment experience, risk tolerance, investment objectives, net worth, annual income, liquid net worth, retirement horizon and other background information, and to complete subscription agreements the firm kept and maintained, but Smalbach asked customers to sign blank information forms and subscription agreements and initial risk and financial disclosures on the subscription agreement without giving some of the customers the opportunity to read what they were signing. FINRA found that Smalbach had an administrative assistant complete the forms with false information Smalbach provided, which enabled him to shroud unsuitable transactions from the firm’s supervisory review.
Moreover, FINRA found that Samlbach falsified client information new account forms and subscription agreements that the firm kept and maintained caused its books and records to be inaccurate. FINRA also found that as a result of these fraudulent misrepresentations, omissions and acts, Smalbach caused customers to sustain approximately $840,116 in net out-of-pocket losses on the $925,000 investment they purchased, and Smalbach received $74,000 in gross commissions from his activities. Furthermore, FINRA found that Smalbach failed to adequately respond to FINRA requests for information and documents.
(FINRA Case #2010021972801)
The information from FINRA’s website has ended.
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
