Scott Donovan Schroeder was named in a customer complaint that asserted the following causes of action: breach of fiduciary duty, misrepresentations and omissions, negligence, breach of contract, and violations of California Code 25110 et seq. and 25503 and 25504.

$280,000.00

The Award has not been paid.

FINRA

FINRA RULE 2010, NASD RULES 2110, 2310(A): SCHROEDER MADE UNSUITABLE INVESTMENT RECOMMENDATIONS TO CUSTOMERS. THESE ELDERLY CUSTOMERS' INVESTMENT OBJECTIVES WERE INCOME, CAPITAL PRESERVATION, CAPITAL APPRECIATION, AND LONG-TERM GROWTH. THEIR RISK TOLERANCE WAS MODERATE. SCHROEDER RECOMMENDED THAT SOME OF THESE CUSTOMERS LIQUIDATE A PORTION OF THEIR MUTUAL FUND HOLDINGS AND USE THE PROCEEDS TO INVEST $100,000 IN OIL AND GAS INTERESTS ISSUED BY AN ENTITY AND $150,000 IN LIFE SETTLEMENT CONTRACTS ISSUED BY ANOTHER ENTITY. SCHROEDER RECOMMENDED THAT ANOTHER OF THESE CUSTOMERS INVEST IN HIGH-RISK INVESTMENTS BY INVESTING $150,000 IN LIFE SETTLEMENT CONTRACTS ISSUED BY A LIMITED LIABILITY COMPANY AND $50,000 IN A HIGH-RISK ASSISTED LIVING FACILITY PRIVATE PLACEMENT INVESTMENT. THE OFFERING MATERIALS FOR ALL OF THESE INVESTMENTS STATED THAT THE INVESTMENTS ARE HIGH-RISK AND THAT INVESTORS COULD LOSE ALL OF THEIR INVESTMENT FUNDS. THE OIL AND GAS INTERESTS ENTITY SUBSEQUENTLY DEFAULTED AND THE CUSTOMERS LOST THEIR ENTIRE $100,000 INVESTMENT. LATER, A RECEIVER WAS PUT IN PLACE TO TAKE OVER THE BUSINESS OPERATIONS OF THE LIFE SETTLEMENT CONTRACTS LIMITED LIABILITY COMPANY, AND THE INVESTMENT IS NOT CURRENTLY MAKING ANY PRINCIPAL OR INTEREST PAYMENTS. SCHROEDER'S RECOMMENDATION THAT THE CUSTOMERS INVEST A HIGH PERCENTAGE OF THEIR RETIREMENT SAVINGS OR ASSETS IN HIGH-RISK INVESTMENTS WAS UNSUITABLE IN LIGHT OF THEIR AGE, NET WORTH, INCOME, INVESTMENT OBJECTIVES, RISK TOLERANCE, AND RETIREMENT STATUSES. SCHROEDER RECOMMENDED THAT A CUSTOMER INVEST IN THE LIFE SETTLEMENT CONTRACTS LIMITED LIABILITY COMPANY. SCHROEDER SUBSEQUENTLY ASSISTED THE CUSTOMER IN OBTAINING A LOAN WITH WHICH TO IMPLEMENT SCHROEDER'S INVESTMENT RECOMMENDATION. AFTER THE CUSTOMER'S LOAN IN THE AMOUNT OF $400,000 WAS APPROVED, HE USED THE ENTIRE LOAN AMOUNT TO INVEST IN THE COMPANY. SCHROEDER DID NOT DISCLOSE THE SOURCE OF THE CUSTOMER'S INVESTMENT FUNDS TO HIS MEMBER FIRM, AT THE TIME HE PROCESSED THE CUSTOMER'S LIFE SETTLEMENT CONTRACTS INVESTMENT THROUGH THE FIRM. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES EXPRESSLY PROHIBITED REGISTERED REPRESENTATIVES FROM ALLOWING CUSTOMERS TO UTILIZE BORROWED FUNDS TO MAKE INVESTMENTS. ALTHOUGH THE INVESTMENT IS NOT CURRENTLY MAKING PRINCIPAL OR INTEREST PAYMENTS, THIS CUSTOMER IS STILL RESPONSIBLE FOR MAKING MONTHLY LOAN PAYMENTS. SCHROEDER MADE MATERIAL MISREPRESENTATIONS AND OMITTED MATERIAL FACTS IN CONNECTION WITH OFFERS AND SALES OF CERTAIN INVESTMENT PRODUCTS. SPECIFICALLY, SCHROEDER OMITTED TO DISCLOSE TO CUSTOMERS THAT THE OWNER AND CHIEF EXECUTIVE OFFICER (CEO) OF THE LIFE SETTLEMENT CONTRACTS LIMITED LIABILITY COMPANY HAD PRIOR DISCIPLINARY HISTORY FOR ACTIONS BROUGHT BY THE SECURITIES AND EXCHANGE COMMISSION, THE TEXAS DEPARTMENT OF INSURANCE, AND ANOTHER INSTITUTION IN CONNECTION WITH FRAUDULENT OFFERS AND SALES OF INVESTMENT PRODUCTS TO THE PUBLIC. SCHROEDER ALSO MISREPRESENTED TO CUSTOMERS THAT HIS RECOMMENDED INVESTMENTS WERE SAFE INVESTMENTS THAT WOULD NOT PUT THEIR INVESTMENT PRINCIPAL AT RISK, WHEN IN FACT THE OFFERING DOCUMENTS FOR THESE INVESTMENTS STATED THAT THE INVESTMENTS ARE HIGH-RISK AND THAT INVESTORS MAY LOSE ALL OF THEIR INVESTMENT FUNDS. SCHROEDER FAILED TO DISCLOSE TO CUSTOMERS THAT THE INCOME DISTRIBUTION PAYMENT THAT HE CAUSED TO BE SENT TO THEM EACH MONTH, PURPORTEDLY FROM EARNINGS ON THEIR INVESTMENTS, INCLUDED A PORTION OF THE EMERGENCY CASH RESERVE FUNDS IN THEIR ACCOUNT WITH HIS FIRM.

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

All Capacities

10/9/2013

WITHOUT ADMITTING OR DENYING THE FINDINGS, SCHROEDER CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY.

FINRA

ACTED IN CONTRAVENTION OF SECTION 5 OF THE SECURITIES ACT OF 1933, FINRA RULE 2010, NASD RULE 2110: A REPRESENTATIVE OF SCHROEDER'S MEMBER FIRM DISCUSSED PRIVATE PLACEMENT SECURITIES OFFERINGS AND PROMOTED THEM AS ATTRACTIVE ALTERNATIVE INVESTMENTS TO HIS LISTENERS DURING HIS RADIO SHOWS, FOR WHICH SCHROEDER SERVED AS A CO-HOST. THESE OFFERINGS WERE UNREGISTERED SECURITIES OFFERED PURSUANT TO THE EXEMPTIONS OFFERED BY RULE 506 OF REGULATION D. THESE OFFERINGS COULD NOT BE SOLD THROUGH GENERAL SOLICITATIONS AND STILL MAINTAIN THEIR EXEMPT STATUS. THE ACTIONS CONSTITUTED GENERAL SOLICITATIONS. THESE STATEMENTS WERE NOT MADE TO CUSTOMERS WITH WHOM THE FIRM, THE REPRESENTATIVE OR SCHROEDER (OR THE ISSUER) HAD A PRE-EXISTING AND SUBSTANTIVE RELATIONSHIP, BUT RATHER BROADCAST INDISCRIMINATELY TO THE GENERAL PUBLIC. AFTER MAKING THE STATEMENTS ON THE RADIO SHOW, SCHROEDER SOLD THE OFFERINGS TO CUSTOMERS. THUS, SCHROEDER'S SALES WERE IMPERMISSIBLE SALES OF UNREGISTERED SECURITIES.

Decision & Order of Offer of Settlement

Civil and Administrative Penalty(ies)/Fine(s)

$15,000.00

Suspension

ANY CAPACITY

TWO MONTHS

12/3/2012

2/2/2013

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SCHROEDER CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $15,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR TWO MONTHS. THE FINE IS DUE AND PAYABLE EITHER IMMEDIATELY UPON RE-ASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDING, WHICHEVER IS EARLIER. THE SUSPENSION IS IN EFFECT FROM DECEMBER 3, 2012, THROUGH FEBRUARY 2, 2013.

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SCHROEDER CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $15,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR TWO MONTHS. THE FINE IS DUE AND PAYABLE EITHER IMMEDIATELY UPON RE-ASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDING, WHICHEVER IS EARLIER. THE SUSPENSION IS IN EFFECT FROM DECEMBER 3, 2012, THROUGH FEBRUARY 2, 2013.

TEXAS

ON OR ABOUT OCTOBER 16, 2003, TO ON OR ABOUT MARCH 22, 2004, SCOTT DONOVAN SCHROEDER ("RESPONDENT") ENGAGED IN THE OFFER FOR SALE AND SALE OF SECURITIES WITHIN THE STATE OF TEXAS ON BEHALF OF A SECURITIES DEALER WHEN RESPONDENT WAS NOT REGISTERED WITH THE SECURITIES COMMISSIONER AS AN AGENT OF THE SECURITIES DEALER. THIS CONDUCT CONSTITUTES A VIOLATION OF SECTION 12.A OF THE TEXAS SECURITIES ACT.

Order

Monetary/Fine

$5,000.00

REPRIMAND

SCOTT DONOVAN SCHROEDER PAID $5,000.00 AS AN ADMINISTRATIVE FINE PURSUANT TO SECTION 23-1 OF THE TEXAS SECURITIES ACT.

APPLICANT WAS NOT AWARE THAT HE WAS NOT PROPERLY LICENSED AND BELIEVED THAT HIS REGISTRATION WITH THE STATE WAS ACTIVE. APPLICANT CEASED CONDUCTING BUSINESS UPON BEING NOTIFIED BY STATE REGULATORS THAT HE WAS NOT PROPERLY REGISTERED. SCOTT DONOVAN SCHROEDER WAS REPRIMANDED.

CUSTOMER BELEIVES THAT THE INVESTMENTS WERE NOT SUITABLE RECOMMENDATIONS

$500,000.00

$80,000.00

I WAS INTRODUCED TO [CUSTOMER]BY MY FATHER-IN-LAW. AT THE TOP OF THE MARKET HE WANTED BETTER RETURNS IN HIS IRA VS HEAVY BOND PORTFOLIO PAST RETURNS. I RECOMMENDED A VARIETY OF MUTUAL FUNDS WITH AN ASSET ALLOCATION OF APPROX. 50-50 EQUITY TO BONDS. HIS STATED TIMEFRAME WITHIN HIS IRA WAS FOR 10 +. SPLIT SETTLEMENT WITH THE FIRM.