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Bad Broker

Michael Walter Mandel Suspended for Participating in Undisclosed Private Securities Transactions

NY

My Bad Broker

Citation

According to FINRA, Michael Walter Mandel was fined $5,000, suspended for seven months, and ordered to pay disgorgement of $5,635.35 plus interest on March 2, 2022, for participating in private securities transactions without providing prior written notice to or receiving approval from his member firms.

Mandel solicited investors, including some firm customers, to invest approximately $815,000 in a tequila production company. He invited investors to promotional events, introduced them to the company's founder, and provided investment documents. Mandel received $5,635.35 from the tequila company and expected to receive a portion of the founder's equity. He falsely stated on a firm compliance questionnaire that he had not participated in private securities transactions outside the firm.

Subsequently, the tequila company's founder pled guilty to making false and misleading statements to investors and misusing investor funds. The SEC filed a complaint alleging the founder made material misrepresentations and misappropriated investors' funds for personal use, resulting in a judgment and injunction against further violations.

Private securities transactions conducted without firm approval, known as selling away

Violation :

Tags :

deprive firms of the ability to supervise these transactions and protect investors. Firms cannot assess suitability, conduct due diligence on offerings, or monitor for fraud when transactions occur without their knowledge. This case illustrates the risks of selling away. The tequila company investment that Mandel promoted turned out to be fraudulent, with the founder misappropriating investor funds. Had the transactions been conducted through Mandel's firm with proper supervision, the firm might have identified red flags and prevented investor losses. Investors should be extremely cautious about investment opportunities presented by their financial professionals outside the normal account relationship. Always verify that investments are approved by and processed through the representative's firm. Investments offered outside the firm lack regulatory supervision and are more susceptible to fraud. The fact that this investment resulted in criminal charges against the founder and an SEC enforcement action demonstrates the heightened risks of unregulated private offerings.,
Michael Walter Mandel,
5000
CRD Number : 2022-03-02

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