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Great Basin Scientific, Inc. (Great Basin) is a biotechnology company that, according to its website, “commercializes technologies that improve ease-of-use and delivers sample-to-result molecular diagnostic testing.” It trades on the NASDAQ exchange under the ticker symbol “GBSN”. Great Basin was underwritten by Dawson James Securities Inc. (Dawson James), a boutique investment bank out of Florida, in an offering on February 25, 2015.

At the time of the offering Great Basin traded at $2.25 per unit and had a market cap of $15 million. According to a letter by Dawson James, the company also issued a secondary offering of $24 million of up to 2.72 million units at $8.80 per unit. Each unit consisted of “one share of Series E preferred stock and eight Series C warrants.”

The price of Great Basin rose after a series of press releases and positive statements, only to plummet at a later date. As of April 2015 Great Basin was trading at a high of $5 per unit, however since then the price has plummeted to $.06 per unit.

According to the Financial Industry Regulatory Authority (FINRA), broker Robert Turpin (Turpin) recently had his registration with his brokerage firm, Source Capital Group, Inc. (Source Capital), terminated for allegedly participating in “selling away” or engaging in unapproved and undisclosed outside business activity.

Turpin has been registered with the Securities Industry since 1985. He has previously been registered with First Financial Equity Corp. in Scottsdale, AZ from 1985-1991, M.F. Diessner Securities Corp. in Phoenix, AZ in 1992; Stiteler Investments, Inc. from 1993-1995, FCS Securities Corp. in Atlanta, GA from 1992-1997, Desert Star Capital Corp. in Phoenix, AZ from 1997-2001, and Uinta Investments, Inc in Gilbert, AZ from 2004-2009. Turpin was most recently registered with Source Capital in Scottsdale, AZ from 2010-2015.

Selling away can be described as when a broker solicits a client to purchase securities not held or offered by the brokerage firm the broker is registered with. As a general rule, brokers are required to only sell securities that have been reviewed and approved by the firm they are registered with. Some of the outside business activities Turpin was reportedly involved with include:

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations to purchase shares of United Mortgage Trust (United Mortgage) real estate investment trust (REIT) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation.

Non-traded REITs, like United Mortgage, carry greater risk than more traditional investments such as stocks and bonds. Because of the greater risk attached to these investments, they are better suited for sophisticated and institutional investors. Broker-dealers have the duty to conduct a proper inquiry in order to determine if an investment is suitable for a customer, and must have a reasonable basis for all recommendations. This inquiry includes looking at the investors age, risk tolerance, net worth and investment experience and determining whether a particular investment is suitable for a given investor.

Some specific risks regarding the United Mortgage Trust can be found in its March 31, 2015 10K filed with the Securities and Exchange Commission:

On September 29, 2015, the Securities and Exchange Commission (SEC) filed charges against Family Endowment Partners, LP (FEP) and broker Lee D. Weiss (Weiss), alleging self-dealing and failure to disclose material facts to clients. Weiss and FEP allegedly urged clients to invest more than $53 million in illiquid securities to the benefit of Weiss and FEP.

Weiss has been in the securities industry since 1992. Weiss has previously been registered with Fidelity Brokerage Services, LLC from 2004 to 2007; Stillpoint Capital, LLC from 2011-2015; and he is currently registered with MIP Global, Inc based out of Massachusetts. Weiss formerly led an investment advisor known as FEP.

The SEC alleges that between 2010 through 2012, Weiss and FEP recommended that 11 clients and two FEP affiliated hedge funds, FEP Fund I, LP (FEP Fund I) and the Catamaran Holding Fund, Ltd. (Catamaran Fund), invest more than $40 million in securities issued by BioSyntec. Weiss did not did not disclose that he had an ownership interest in BioSyntec and that he received payment from the company. Weiss received over $600,000 in payments from BioSyntec shortly after Weiss recommended the investments to be made.

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations of Halcon Resources Corporation (Halcon) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation.

Halcon, a Texas based company, is an independent oil and gas company that explores for crude oil, natural gas and natural gas liquids in the US and Canada. According to a recent press release, Halcon was able to reduce its long term debt by $548 million. However, even with that reduction Halcon still has a total debt of around $3 billion dollars as it struggles to stay afloat. In addition to the falling price of oil Halcon has accumulated debt because its oil wells are not producing as much as when they first started production.

Because of the risk associated with commodity investments such as oil and gas, such investments are better suited for sophisticated investors with higher risk tolerances. When a broker recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor. In making this assessment, a broker must consider the investors income and net worth, investment objectives, risk tolerance, and other security holdings.

According to the Financial Industry Regulatory Authority (FINRA) former LPL Financial, LLC (LPL Financial) Broker Garrett Aherns (Aherns) has been fined because of allegations he used false and misleading consolidated reports with clients. In addition, Aherns has had at least two (2) customer complaints made against him. The customer complaints reportedly concern allegations that Aherns made unsuitable investment recommendations, misrepresentations, breach of fiduciary duty and negligence.

Aherns has spent 30 years in the securities industry. Aherns was registered with Balentine & Company in Atlanta, Georgia from 1996-1998 ; Edward D. Jones & Company in St. Louis, Missouri from 1989-1996; and most recently with LPL Financial from 1998-2015. Aherns is not currently registered with any firm.

An investigation by FINRA revealed that between January 6, 2011 and July 7, 2013, Aherns allegedly prepared a total of 65 consolidated reports that inaccurately reflected the value and performance of his clients’ investments including private placements and non-traded real estate investment funds (REITs). Customers may have difficulty in assessing the value of such investments because non-traded REITs and private placements are not listed on any stock exchange and transactions in such securities are typically not publicly reported.

According to the Financial Industry Regulatory Authority (FINRA), Questar Capital Corporation (Questar Capital) broker Jeffery Mohlman (Mohlman) was barred from the securities industry over failure to respond to regulatory requests concerning his alleged unapproved and undisclosed private securities transactions. FINRA had requested that Mohlman appear for on-the-record testimony, Mohlman’s counsel informed FINRA that Mohlman would not appear for the testimony at any time.

Mohlman has been registered with the securities industry since 2001. He has previously been registered with Met Life Securities, Inc. from 2002-2009, Investacorp, Inc from 2009-2011, and Questar Capital from 2012-2015.

FINRA began their investigation after Mohlman was terminated from Questar Capital in February of 2015. Questar Capital filed a Form U5 with FINRA stating Mohlman resigned after there were allegations that Mohlman failed to follow firm policies and procedures regarding participation in private securities transactions. Specific information regarding Mohlman’s private transactions are not publicly available at this time.

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations of Oil Linked Structured Notes (Structured Notes) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation.

A structured note is a debt obligation from an investment bank that uses derivatives to create the desired exposure to one or more investments. Oil linked structured notes were created in order to protect investors against a drop in the price of crude oil. However, since oil prices have suffered substantial losses in the past two (2) years (this year being a six-year low in price) the Structured Notes have dropped in value.

According to Bloomberg Business News (Bloomberg), of the $437.1 million in Structured Notes that have matured this year, 44%, or $192.3 million has dissipated. Bloomberg analyzed the SEC filings of 39 Structured Notes and found that 36 of the 39 Structured notes protected against a certain percentage of losses, typically 10-20%. After the price of oil dropped more than 60% those protections were quickly overwhelmed. Thus, investors who purchased the notes as a hedge against other investments linked to the price of crude oil (or physical crude oil) may not have benefited as much as they reasonably expected from the hedge provided by the Sructured Notes.

According to the Financial Industry Regulatory Authority (FINRA) former J.P. Turner & Company, LLC (J.P. Turner) broker John M. Lopinto (Lopinto) has had at least two (2) customer complaints made against him. Some of the customer complaints reportedly allege negligence, breach of fiduciary duty, misrepresentation, unsuitable and excessive trading, fraud and churning.

Lopinto has been working in the securities industry since 2002. Lopinto has been employed with Great Eastern Securities, Inc. from August of 2005 to December of 2006; Pointe Capital, Inc. from January of 2007 to January of 2009; National Securities Corp. from January of 2009 to February of 2010; JP Turner from February of 2010 to August of 2011; and Legend Securities, Inc. from August 0f 2011 to present.

In a 2012 complaint a customer reportedly alleged that Lopinto recommended an unsuitable investment and negligently breached his fiduciary duty in connection to a private placement investment. The complaint was settled for $50,000. In another complaint filed in 2012 a customer reportedly made similar allegations against Lopinto. The customer sought $1 million in compensation; the case was eventually settled for $250,000.

Recommendations of Van Eck International Investors Gold Fund (Van Eck Fund) by broker-dealers and investment advisors may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation.

The Van Eck Fund is a type of mutual fund, meaning the portfolio is funded by investors; the holdings are diversified and are professionally managed. The risks faced by this type of investment are tied to the securities in the investment portfolio. The Van Eck Fund invests in common stocks of gold-mining companies. According to the Van Eck Fund website “[The] Fund seeks long term capital appreciation…income is a secondary consideration.” The fund has returned -34.45% over the past year, -32.38% over the past three years and -21.83% over the past five years.

When a broker recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor. In making this assessment, a broker must consider the investors income and net worth, investment objectives, risk tolerance, and other security holdings.