The regulator has banned the firm’s executives and the firm from doing business.
A Financial Industry Regulatory Authority (FINRA) hearing panel has fined New York-based Avenir Financial Group $229,000 for “misconduct including the fraudulent sales of equity interests in the firm and promissory notes,” and suspended it for two years from engaging in any self-offerings.
In addition, the FINRA panel has barred former CEO and Chief Compliance Officer Michael Todd Clements from the securities industry for fraud, and “suspended registered representative Karim Ahmed Ibrahim (aka Chris Allen) for two years for fraud, and ordered Ibrahim to disgorge his $25,000 commission.”
In its original cease-and-desist order, issued in April 2015, FINRA characterized the firm’s fraudulent sales as “often to elderly customers of the firm,” specifying that during its three years as a FINRA member, “Avenir and its branch offices have raised over $730,000 in 16 issuances of equity or promissory notes. Most of these sales of equity and promissory notes were to elderly customers of the firm.”
The more recent FINRA report offers the following examples of defrauded clients:
- “In one instance, a 92-year-old customer was told his $250,000 investment would be used to grow the firm and fund its day-to-day operations, and that one day his investment would be returned ‘in a very large amount.’ Beyond the purchase agreement, Ibrahim did not provide the customer with any written materials, including any written information about the firm. Ibrahim admitted in testimony prior to the hearing that he was aware that Avenir faced a dire regulatory capital situation, yet he did not disclose this material fact to the customer.”
- Cesar Rodriguez, a now-barred registered representative who was under Clements’ direct supervision, “sold a 2 percent equity interest in Avenir for $100,000 to a customer who had recently lost his daughter in a car accident, and was investing the life insurance proceeds to provide for his six-year-old grandchild’s future. Rodriguez and Clements assured the customer that Avenir was a growth company that was doing ‘exceptionally well’ and was ‘growing exponentially.’ ” Meanwhile, according to FINRA, “Clements did not provide the customer with any written documents except for the purchase agreement, and neglected to provide any information about the firm’s financial condition, including that Avenir had recently been prohibited for several weeks from conducting a securities business due to insufficient capital. Rodriguez later also sold him equity and promissory notes in the branch office holding company.”
FINRA noted also that “Avenir and Clements failed to accept responsibility for their misconduct and that Ibrahim failed to express remorse, all of which were aggravating factors considered when assessing sanctions.”
While the panel “dismissed the charges that Clements aided and abetted the fraud, as well as the charge that Avenir misused customer funds,” the firm and Clements and Ibrahim also were ordered to offer rescission to defrauded customers, FINRA says, noting that, since May of last year, the “firm, Clements, and Ibrahim have been subject to a temporary cease and desist order pending the resolution of the charges.”
The panel also called Avenir “thinly capitalized and in need of an immediate capital infusion to comply with net capital rules,” when it offered investors an equity self-offering in 2013. “Clements, who oversaw Ibrahim’s capital-raising efforts, directed Ibrahim to raise capital from customers who were told their funds would be used for Avenir’s day-to-day operations and growth. The [FINRA] decision noted there was much information Clements did not tell Ibrahim, including the firm’s precarious financial situation.”
At its website, Avenir says that its “experienced professionals work with our clients to manage their expectations and create customized strategies to achieve their objectives. We apply our decades of cumulative market knowledge and experience in providing prudent investment choices and sometimes out-of-the-box creative opportunities in non-traditional global investments. Whether our clients are unsophisticated individual investors, sole proprietors or experienced large institutions, each account receives the individualized attention on requires.”
According to the regulatory authority, Avenir resigned from FINRA sometime during the month of August 2016.
In fact, the firm might be out of business or doing business under another name.
At the phone number listed for its downtown Manhattan office, for example, an unidentified man answered a reporter’s call with the name of a different broker-dealer and denied any knowledge of Avenir, other than to speculate that it might be the name of the firm that had that phone number previously.
In addition, the phone number listed for Avenir’s Long Island office now connects to a voicemail recording for a local pharmacy.