According to FINRA, Blake Adam Levy was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months for recommending investments without reasonable basis and making negligent material omissions.

Levy recommended that customers purchase membership interests in two funds totaling $2,260,299 through private placement offerings without having a reasonable basis to make those recommendations. He failed to perform reasonable diligence on the funds before recommending them and did not understand the risks related to the investments. His review of offering materials was cursory and only aimed at giving himself a high-level understanding of the offering terms, which was inadequate for recommending such substantial investments.

The violations became more serious due to material omissions. When Levy sold membership interests in the funds to customers, he negligently failed to inform them about his role in the management company that managed the funds and the sources of his potential compensation. Levy was one of two equal owners in the management company and was entitled to compensation from three sources: management fees, placement agent fees, and performance fees.

Neither the offering materials nor Levy disclosed that fees would be divided among the placement agent, the management company, and the selling broker. By virtue of his dual role in the management company and as a selling broker, Levy was entitled to receive portions of multiple fee streams. Because Levy never fully reviewed the offering materials, he was incapable of correcting the omissions therein.

These undisclosed conflicts of interest were material—they meant Levy had significant financial incentives beyond normal selling compensation to recommend these funds regardless of suitability for customers. Customers had a right to know that their advisor was not only earning selling commissions but also stood to receive ongoing management and performance fees through his ownership interest in the management company.

The four-month suspension reflects serious suitability and disclosure failures involving over $2.2 million in customer investments. For investors, this case illustrates the critical importance of understanding all sources of compensation and potential conflicts of interest when financial professionals recommend private placements. The suspension is in effect from June 20, 2023, through October 19, 2023.