Home Alts News FINRA Bars Former Ausdal Rep Over Unreported Private Investment Transaction

FINRA Bars Former Ausdal Rep Over Unreported Private Investment Transaction

The Financial Industry Regulatory Authority barred David R. Geake from associating with any FINRA member in all capacities for participating in a private securities transaction by soliciting two investors to pledge securities as collateral for a startup company.

According to FINRA, in November 2016 while registered as a representative with Ausdal Financial Partners, Geake solicited two elderly investors, a husband and wife, to pledge approximately $15 million of securities as collateral to guarantee a $2.5 million loan from a bank on behalf of a startup company developing technology to sell automotive parts online.

Geake had also personally invested $100,000 in the company without providing written notice to Ausdal Financial Partners and was a member of its board of directors. Neither of the investors were Ausdal customers.

FINRA says Geake assured the couple that their risk of investment loss was minimal. Geake structured the transaction and facilitated the paperwork on behalf of the couple. The pledge of securities as collateral for the loan was an offer of a security. The couple received 200 shares of the company’s common stock in exchange for their guarantee of the loan. FINRA says that by soliciting this pledge of securities and facilitating the transaction, Geake participated in a private securities transaction.

By April 2018, the company had fully defaulted on the bank loan and closed its business. In 2018, the bank called for the loan to be paid in full. As a result, the couple were required to repay the entire $2.5 million bank loan with interest.

According to FINRA, Ausdal Financial Partners’ policies prohibited its registered representatives, including Geake, from engaging in any private securities transaction without prior express written permission. Geake did not provide a written notice to Ausdal Financial Partners prior to participating in the private security transaction. In addition, Geake twice incorrectly attested to Ausdal Financial Partners on his annual compliance questionnaire that he had not participated in any private securities transactions.

According to BrokerCheck, Geake was an advisor at American Trust Investment Services, since 2018, after leaving Ausdal Financial. Prior to that, he was an advisor for Madison Avenue Securities for nearly eight years. He also previously worked for American General Securities and Franklin Financial Services.

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