Finra is seeking to shut down a broker-dealer it alleges is selling fraudulent oil and gas private placements.
Finra is seeking to shut down a broker-dealer it alleges is selling fraudulent oil and gas private placements. The Financial Industry Regulatory Authority Inc. today filed a notice seeking a temporary cease-and-desist order against Pinnacle Partners Financial Corp. and its president and owner, Brian K. Alfaro.
The case involves sales of eight private placements. Finra charged that Mr. Alfaro operates a “boiler room where numerous registered representatives place thousands of cold calls weekly to solicit investments in Alfaro’s captive oil and gas drilling joint ventures.”
Pinnacle has raised over $10 million from over 100 investors for offerings that Finra alleges “materially misrepresented or omitted facts,” according to its complaint.
The regulator’s department of enforcement filed the order today with a Finra hearing panel. That panel has about two weeks to make a decision on the regulator's request to close down the operation.
Mr. Alfaro was not immediately available to comment.
The alleged fraud began in August 2008. In one offering, Mr. Alfaro deleted the following language from an investment summary offered to clients: “All currently producing wells are very marginal,” according to Finra’s complaint. In another placement offering, Mr. Alfaro’s documentation stated that the deal had made “cash distribution to partners” of $14.3 million, when the actual figure was $1.5 million, Finra alleged.
“Pinnacle and Mr. Alfaro also provided investors with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling states,” the complaint alleged. “In the investment summaries, Pinnacle and Mr. Alfaro grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns, and estimated monthly cash flows.”
The complaint said that from January 2009 to last month, Mr. Alfaro misused customer funds to meet obligations for previous offerings, cover personal expenses and take cash payments, according to the complaint. Pinnacle and Mr. Alfaro also is charged with destroyed documents, maintained inaccurate books and records and failed to report investor complaints.
