Pinnacle Partners expelled, president barred over alleged private placement fraud

Apr 25, 2012 @ 6:23 pm

By Dan Jamieson

A Financial Industry Regulatory Authority Inc. hearing officer on Wednesday expelled Pinnacle Partners Financial Corp. and barred its president, Brian Alfaro, for alleged fraudulent sales of oil and gas private placements.

The hearing officer, Lawrence Bernard, issued a default decision against Mr. Alfaro, who declined to defend himself at a February hearing.

"There was no reason to fight" the charges, said Mr. Alfaro's attorney, Alan Wolper, a partner Ulmer & Berne LLP.

Mr. Alfaro was out of the industry, and the firm had withdrawn its registration by then, Mr. Wolper said.

In April, Finra indefinitely suspended Pinnacle and Mr. Alfaro for failure to comply with an earlier cease and desist order.

Mr. Alfaro is still in the oil and gas business and doesn't need to be associated with a broker-dealer, Mr. Wolper said.

Mr. Bernard, the hearing officer, also ordered the San Antonio, Texas-based firm and Mr. Alfaro to buy back the 11 private placements at issue, or refund the 15% in sales commissions earned on the deals.

Finra claimed that Mr. Alfaro and Pinnacle ran a boiler room operation from August 2008 to March 2011 that raised over $10 million from more than 100 investors.

Mr. Alfaro used customer funds for personal and business expenses, the default decision said. In one instance, Mr. Alfaro collected more than $500,000 in subscription costs for a well that was never drilled, and used those funds for unrelated personal and business expenses.

Mr. Alfaro has denied Finra's allegations.

By defaulting, there is no proof or admission of guilt, Mr. Wolper said.

Mr. Wolper did not know if Mr. Alfaro would rescind the purchases or refund commissions, but he said Finra has little ability to enforce a decision against a firm or individual who are no longer registered.

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