Skip to content
The DI Wire
Click Here to Subscribe to Our Free Daily News Updates

FINRA Fines and Suspends Former Advisor Over GPB Capital Sales

FINRA Fines and Suspends Former Advisor Over GPB Capital Sales. Broker-dealer, brokerage, Financial Industry Regulatory Authority, financial services, FINRA, RIA, GPB Holdings
FINRA Fines and Suspends Former Advisor Over GPB Capital Sales. Broker-dealer, brokerage, Financial Industry Regulatory Authority, financial services, FINRA, RIA, GPB Holdings

The Financial Industry Regulatory Authority fined and suspended Arni J. Diamond, whom the regulator says improperly sold limited partnership units in GPB Automotive Portfolio LP and GPB Waste Management LP.

According to FINRA, from November 2014 to March 2018, Diamond made “unsuitable recommendations” in speculative alternative investments to two customers that were inconsistent with the customers’ investment profiles. The first customer, a 67-year-old without an annual income and net worth to qualify him as an accredited investor, made a $50,000 investment in the Automotive Portfolio in June 2015. The second customer made six investments totaling $200,000 in GPB Capital limited partnership interests between November 2014 and March 2018. He was in his early sixties and had a moderate risk tolerance.

GPB Capital is a New York-based alternative asset management firm founded in 2013 that sponsored a number of Regulation D private placement investment funds. Last year, the Justice Department and the Securities and Exchange Commission charged the firm and its executives with running a fraudulent “Ponzi-like scheme” that raised approximately $1.8 billion from investors.

In July 2017, GPB Capital filed a lawsuit in New York against one of its former operating partners who had allegedly failed to acquire certain automotive dealership interests. The former partner made various counterclaims, including that GPB allegedly falsified financial statements to conceal fraud. GPB Capital denied the allegations and the litigation remains pending.

GPB Capital later notified broker-dealers that sold its products that it was in the process of registering certain classes of securities issued by its limited partnerships with the SEC. As part of that process, GPB was required to file audited financial statements, which they said would be delayed pending the completion of a forensic audit.

Specifically, GPB disclosed that it and its auditors “determined that it would be prudent to hire a third-party firm to complete a forensic audit in order to endeavor to put [the former partner’s] counterclaims and other allegations to rest.” FINRA said that the offering documents were not timely amended to disclose that the filings would be delayed.

More than a dozen broker-dealers have been sanctioned by FINRA for similar alleged misconduct related to sales of GPB offerings.

Diamond consented to a four-month suspension from associating with any FINRA member in all capacities and a $5,000 fine.

Diamond has been affiliated with 12 firms, according to BrokerCheck, and has had at least 18 customer disputes, most of which are settled. He was registered with Kalos Capital at the time of the noted GPB transactions. Kalos announced last year that it was going out of business and filing bankruptcy as a result of the millions in costs related to sales of GPB offerings Diamond is not currently registered with any broker-dealer.

Click here to visit The DI Wire directory page.