The Law Planet Blog

A recent article in the Sarasota Herald-Tribune described a FINRA (formerly NASD) arbitration award to a retiree in Venice, Florida. I'm not particularly upset about the award, I don't know enough of the facts based upon the article.

From what I can tell, there were at least two registered representatives and one unregistered person who were somehow involved in the sale of an unapproved product to the retiree. This is a violation of FINRA rules and I am certain that it violated Sterne Agee's internal procedures. Frankly, if this occurred as described, the brokers should have known better.

What troubled me most was the mention of the "hedge fund" promoter at the end of the article. Guy Della Penna is a former stockbroker who was found by an arbitration panel to have violated State and Federal Securities laws in 2002. He fought the award and, ultimately, the Fifth District Court of Appeals confirmed it. I have not kept up on the case, but last I heard the award was still outstanding. With this information, who in their right mind would give this guy parking meter change let alone over $100,000?

This information was, and is, publicly available and should have been disclosed by either the selling brokers, registered or not, and Della Penna himself. I don't know if this was done. This is the problem with the world of unregistered investment vehicles. The disclosures are weak, if any. The oversight is lax and the only time an investor finds out something is wrong is when the investment vehicle itself is pushing up daisies. It wouldn't have been easy, but the successful arbitration litigant in this case should have been able to find out about Mr. Della Penna and taken his money elsewhere.

Remember, your mother was right. If it sounds too good to be true, it is. And there is no such thing as a secure investment that pays higher than CD returns but is as safe as a CD. IT DOES NOT EXIST! If it did, would I be writing this blog?

That's the view from The Law Planet - Jupiter, Florida.