FINRA

Without admitting or denying the findings, Johnson consented to the sanctions and to the entry of findings that he made negligent misrepresentations and omissions in connection with securities investments made away from his member firm by the firm's customers. The findings stated that Johnson discussed with the customers their purchase of a 10 percent interest in a company that was formed to develop rural land into a residential neighborhood in West Virginia and he inaccurately represented to the customers. Johnson inaccurately represented that all development costs had been covered, houses were ready to be built on the property, the customers' investment, along with that of others, would allow the company to begin building houses immediately, and the infrastructure for building the houses was already in place. In fact, none of these statements was accurate. Johnson also provided the customers with written materials, including a brochure, on which he made a handwritten note, "$5 to $9 million," to indicate the customers' ultimate expected profit from their investment in the company, and also provided them a with a handwritten note stating that the company would have an immediate expected profit of $20,000,000, of which their portion would be $2,000,000, within three years of their investment. Johnson lacked a reasonable basis for believing that these statements were true. Johnson also omitted material facts, of which he was aware, that should have been disclosed. These included among others that the company had, days before the customers' investment, purchased from Johnson and another of its member the same interest being sold to the customers for substantially less than the amount the customers were paying, also that an associate of Johnson, and one of the company's original investors, had been indicted on Ponzi scheme charges and had sold his interest in the company at the request of the other owners because of those charges, less than three months earlier, and that the company had $8.3 million in outstanding debt (from two separate loans). Additionally, the customers purchased a $70,000 note from the company. In connection with the sale of this note, Johnson told the customers that their funds were needed to pay an expert the company had retained to secure Housing and Urban Development (HUD) financing for the development project. In fact, the money was not going to be used to pay the expert. Johnson also told them that the HUD financing was "free money" rather than the loan it really was, and that the company was applying for the loan, rather than the city that had approved the project. Finally, Johnson also told the customers that the $70,000 note would be repaid by the company in a short time. Johnson did not have a reasonable basis for making the statements, and the company never repaid the customers' note. The findings also stated that Johnson participated in the private securities transactions to the customers without giving prior written notice to his firm. The findings also included that Johnson failed to provide his firm with the requisite written notice of his full involvement in the company, as well as his involvement in two other OBAs. Exactly, Johnson exceeded the scope of his firm's approval of his involvement in the company as an OBA and failed to disclose his involvement in the other OBAs to his firm. As related to the company, Johnson failed to disclose all changes in the company's ownership, his increased level of activity in the company, and the recommendations he made in connection with the customers' investments in the company.

Acceptance, Waiver & Consent(AWC)

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

$50,000.00

Suspension

All Capacities

Two years

12/7/2015

12/6/2017

CLIENT ALLEGES REGISTERED REPRESENTATIVE BREACHED FIDUCIARY DUTY AND FIRM FAILED TO DO DUE DILIGENCE ON A $25000.00 INVESTMENT WHICH WAS 5% OF CUSTOMERS $440000.00 NET WORTH.

$25,000.00

FIRST ALLIED SECURITIES, INC.

Discharged

REGISTERED REPRESENTATIVE VIOLATED FIRM POLICY BY PLACING TRADES IN A CUSTOMER ACCOUNT WITHOUT SPEAKING WITH THE ACTUAL CUSTOMER.

FIRST ALLIED SECURITIES, INC.

Discharged

REGISTERED REPRESENTATIVE VIOLATED FIRM POLICY BY PLACING TRADES IN A CUSTOMER ACCOUNT WITHOUT SPEAKING WITH THE ACTUAL CUSTOMER.

COMPLAINANTS ALLEGE THAT ADVISOR INDUCED THEM TO INVEST IN WEST VIRGINIA FARM PROPERTIES BASED ON FRADULENT MISREPRESENTATIONS AND MATERIAL MISREPRESENTATIONS. ALSO ALLEGE ADVISOR INDUCED THEM TO ENTER INTO A PRIVATE MORTGAGE.

$470,000.00

$600,000.00

MANY OF THE STATMENTS MADE IN THEIR COMPLAINT ARE EITHER FALSE, MISLEADING, OR UNFOUNDED. I LOOK FORWARD TO PROVIDING EVIDENCE OF THE ACTUAL EVENTS.

COMMONWEALTH FINANCIAL NETWORK

Permitted to Resign

UNDISCLOSED OBAS

I WAS NEVER TOLD THAT I VIOLATED ANY FINRA REGULATIONS. I HAVE NEVER RECEIVED A LETTER WHICH STATED THAT I WAS PERMITTED TO RESIGN, OR ANY REASON THIS ACTION WAS TAKEN.

CUSTOMER ALLEGES THAT VL POLICY PURCHASED IN 2003 IS UNSUITABLE FOR HIM. CUSTOMER ALSO CLAIMS THAT INVESTMENT IN OIL AND GAS WAS UNSUITABLE AND MAKES UNARTICULATED ALLEGATIONS THAT RR WAS RESPONSIBLE FOR CUSTOMER'S DECISION TO PURCHASE A REAL ESTATE PARCEL AT THE HEIGHT OF THE REAL ESTATE MARKET

$919,624.00

$2,500.00

THE CLAIM INITIALLY ALLEGED MORE THAN $600,000 IN DAMAGES. HOWEVER, CUSTOMER ACCEPTED $2,500 IN SETTLEMENT OF THE MATTER. RR AGREED TO SETTLE DESPITE HIS BELIEF THAT THE CLAIMS WERE MERITLESS, BECAUSE THE COST OF A SUCCESSFUL DEFENSE WOULD HAVE EXCEEDED THE CUSTOMER'S MINIMAL DEMAND.