A brokerage firm that terminated its registration after its CEO got barred from the industry and its affiliated RIA got hit with SEC charges now faces a new FINRA enforcement case as well.
Coral Springs, Florida-based Fusion Analytics Securities made “material misrepresentations and omissions” to clients when selling $1.8 million worth of private bonds to at least 11 clients between January 2017 and August 2019,
The case emerged a week after FINRA charged a suspended brokerage, Worden Capital Management, with
The FINRA enforcement action against Fusion Analytics triggers an exchange of documents between the regulator and the respondent, which will lead to either a settlement of the case, further negotiations or, potentially, an administrative hearing, according to Louis Straney, an expert witness in fraud cases who has a company called Arbitration Insight.
“This is a very early-stage issue, and it's likely to go on for several months,” Straney said. “Anything of material interest that would affect an investor’s decision has to be disclosed.”
Attorneys representing Conte and the brokerage firm’s RIA affiliate under common ownership, Fusion Analytics Investment Partners, in the SEC enforcement case in Miami federal court didn’t respond to requests for comment. Two office numbers listed in the company’s SEC Form ADV brochure were out of service. The FINRA enforcement action doesn’t name Conte as a respondent, though it mentions him by his initials and title at the company many times. Conte is one of two principal owners of the parent company of the brokerage and RIA, the filings show.
Conte accepted the bar from FINRA after refusing to appear for testimony before the regulator about its “investigation into potential misrepresentations made in the participation in and supervision of the sale of multiple private offerings of bonds,”
In March 2017, Conte sent an email solicitation to 139 retail investors describing a bond product tied to the construction of a power plant as an “exceptional opportunity” with an “EBITDA of over 50%,” according to FINRA investigators. However, the firm didn’t tell clients that the SEC had issued an order in 2013 against an affiliated bond issuer for misleading investors, including Fusion Analytics’ own clients, and diverting millions of dollars in investor funds to the owner and his family, investigators say. The document doesn’t identify the owner of the two bond issuers or the product itself, referring to him as “Promoter 1” and the firms as “OldCo” and “NewCo.”
“Promoter 1 and his family owned and controlled NewCo, which was an affiliate of OldCo. Promoter 1 and his family also controlled OldCo. Fusion had helped raise money for OldCo for years prior to the NewCo bond offerings,” according to the document. “Fusion intentionally or recklessly made material misrepresentations and omissions and, separately, disseminated documents it knew or was reckless in not knowing contained material misstatements and omissions, to potential investors.”
The pending SEC case involves separate allegations against Conte, the Fusion Analytics’ RIA and the parent of the RIA and the brokerage, Fusion Analytics Holdings. Conte, a 48-year-old resident of St. James, New York, and the RIA made material misrepresentations about the “profitability and the safety and soundness” of promissory notes tied to the firm’s parent company between 2010 and 2016, according to the SEC. Conte and the RIA raised $1.4 million from at least 10 investors, most of whom were retired and “elderly,” investigators say.
“Defendants were unable to repay investors their principal at the time of the notes’ maturity due to [the RIA’s] worsening financial condition,” according to the SEC complaint. “Ultimately, defendants defaulted on the majority of the notes. Defendants have repaid certain investors all or part of the outstanding principal and interest related to their notes. To date, defendants have failed to repay two notes totaling $246,000 in principal.”
In a filing in October responding to the SEC’s allegations, Conte and the company denied they made false or material misrepresentations, failed to act in good faith or exercise reasonable diligence, among other defenses. A settlement may be on the way in the case: the SEC and the defendants attended a JAMS mediation session last month, according to the most recent filings in Miami federal court.
“All parties and counsel were present,” a JAMS mediator said last month. “The parties agreed at the conclusion of the mediation session to keep the mediation process open to allow the parties, with the assistance of the mediator (if necessary), to continue working towards a settlement.”
