Initiated By
FINRA
Allegations
FINRA RULE 2010, NASD RULES 2110, 3030, 3040: BLAKE FORMED AN ENTITY SO THAT HE AND THREE COLLEAGUES COULD POOL FUNDS TO INVEST IN COMMERCIAL REAL ESTATE PROJECTS AND THROUGH THIS ENTITY HE PARTICIPATED IN PRIVATE SECURITIES TRANSACTIONS WITHOUT PROVIDING TO HIS MEMBER FIRMS PRIOR WRITTEN NOTICE. THEREAFTER, THE ENTITY'S SIZE AND SCOPE EXPANDED BEYOND THE SEVERAL INDIVIDUALS WHO INITIALLY FORMED THE ENTITY. THE ENTITY INVESTED APPROXIMATELY $3,200,000 IN REAL ESTATE PROPERTIES BEING DEVELOPED BY A REAL ESTATE DEVELOPMENT ENTERPRISE ORGANIZED AS A LIMITED LIABILITY COMPANY. THE INVESTED FUNDS WERE PROVIDED BY TWENTY-EIGHT INVESTORS AND TWELVE OF THESE INVESTORS WERE CUSTOMERS OF ONE OR THE OTHER OR OF BOTH OF BLAKE'S FIRMS AT THE TIME OF THEIR RESPECTIVE INVESTMENTS. BLAKE PERSONALLY INVESTED IN THE PROJECTS. EACH INVESTMENT OF FUNDS IN THE ENTITY WAS THE PURCHASE OF A SECURITY IN THE FORM OF AN INVESTMENT CONTRACT. BLAKE PARTICIPATED IN THE SALE OF THE ENTITY'S INVESTMENTS BY SOLICITING INVESTORS, RECEIVING, PROCESSING AND FORWARDING THE FUNDS THAT WERE INVESTED, PROVIDING THE INVESTORS WITH DOCUMENTATION EVIDENCING THEIR INVESTMENTS, FUNCTIONING AS THE POINT OF CONTACT BETWEEN THE INVESTORS AND A REAL ESTATE DEVELOPMENT ENTERPRISE, APPRISING THE INVESTORS OF THE STATUS OF THE ENTITY'S INVESTMENTS AND CAUSING THE PREPARATION OF SCHEDULE K1 FORMS. BLAKE COMPLETED HIS FIRM'S ANNUAL COMPLIANCE QUESTIONNAIRES AND ANSWERED "YES" WHEN ASKED IF HE UNDERSTOOD HE WAS NOT PERMITTED TO COMMINGLE HIS FUNDS WITH A CLIENT'S FUNDS AND THAT HE WAS NOT TO ACCEPT A CLIENT'S CHECK MADE PAYABLE TO HIM OR ANY ENTITY OR PERSON ASSOCIATED WITH HIM FOR A SECURITIES TRANSACTION. BUT, BLAKE CONTINUED TO ACCEPT CHECKS MADE PAYABLE TO THE ENTITY AND HE COMMINGLED HIS FUNDS WITH CLIENT'S FUNDS IN THE ENTITY'S BANK ACCOUNT. BLAKE NEVER ADVISED HIS FIRMS ORALLY OR IN WRITING THAT HE WAS PARTICIPATING IN THE PRIVATE SECURITIES TRANSACTIONS. TO THE CONTRARY, BLAKE INDICATED EACH YEAR, IN ANNUAL COMPLIANCE QUESTIONNAIRES, THAT HE HAD NOT ENGAGED IN PRIVATE SECURITIES TRANSACTIONS. THE REAL ESTATE DEVELOPMENT ENTERPRISE FILED FOR BANKRUPTCY AND, TO DATE, NONE OF THE INVESTORS IN THE ENTITY'S INVESTMENTS HAVE RECEIVED A RETURN OF THEIR PRINCIPAL OR ANY INTEREST OR OTHER PAYMENTS. BLAKE COMPLETED HIS ASSOCIATED FIRM QUESTIONNAIRES AND FALSELY ANSWERED "NO" WHEN ASKED IF HE HAD ENGAGED IN PRIVATE SECURITIES TRANSACTIONS. BLAKE DID DISCLOSE THE ENTITY AS AN OUTSIDE BUSINESS IN OUTSIDE BUSINESS ACTIVITY FORMS ON AUGUST 31, 2003, SEPTEMBER 8, 2004, MARCH 14, 2005 AND OCTOBER 1, 2007. HOWEVER, BLAKE DID NOT DISCLOSE THE ENTITY AS AN OUTSIDE BUSINESS IN OUTSIDE BUSINESS ACTIVITY FORMS WHICH HE COMPLETED ON SEPTEMBER 18, 2006 AND JULY 31, 2008, INQUIRING INTO ALL OF HIS OUTSIDE BUSINESS ACTIVITIES. THE ENTITY'S SIZE, SCOPE AND ACTIVITY CHANGED SIGNIFICANTLY AFTER BLAKE'S INITIAL DISCLOSURE AND THESE CHANGES CAUSED THE INITIAL DISCLOSURE TO BECOME INACCURATE AND, GIVEN THE NATURE AND EXTENT OF ITS ACTIVITIES, MISLEADING. BLAKE DID NOT AMEND OR UPDATE THE OUTSIDE BUSINESS DISCLOSURE CONCERNING THE ENTITY AT ANY TIME. BLAKE'S FALSE AND INCOMPLETE INFORMATION ON COMPLIANCE QUESTIONNAIRES AND BY FAILING TO UPDATE AND CORRECT HIS OUTSIDE BUSINESS DISCLOSURE MISLED HIS FIRM. BY MISLEADING THE FIRM, BLAKE DEPRIVED HIS EMPLOYER OF INFORMATION THAT COULD HAVE RESULTED IN THE DETECTION OF HIS PARTICIPATION IN PRIVATE SECURITIES TRANSACTIONS, NOTWITHSTANDING HIS FAILURE TO MAKE AN AFFIRMATIVE DISCLOSURE IN THE QUESTIONNAIRES. BLAKE FAILED TO PROVIDE HIS FIRM WITH ANY NOTICE AT ALL, INCLUDING WRITTEN NOTICE, OF A SECOND LIMITED LIABILITY COMPANY HE CAUSED TO BE CREATED.
Resolution
Decision & Order of Offer of Settlement
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$10,000.00
Sanctions
Suspension
Registration Capacities Affected
ALL CAPACITIES
Duration
ONE YEAR
Start Date
10/7/2013
End Date
10/6/2014
Regulator Statement
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, BLAKE CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS FINED $10,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ALL CAPACITIES FOR ONE YEAR. THE SUSPENSION IS IN EFFECT FROM OCTOBER 7, 2013, THROUGH OCTOBER 6, 2014. FINE PAID IN FULL 10/04/13.
Broker Comment
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, BLAKE CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS FINED $10,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ALL CAPACITIES FOR ONE YEAR. THE SUSPENSION IS IN EFFECT FROM OCTOBER 7, 2013, THROUGH OCTOBER 6, 2014.
