On May 21, 2018, the Financial Industry Regulatory Authority, Inc. (FINRA) suspended Peter Holler from associating with firms registered with FINRA for two years and fined him $10,000. FINRA—the self-regulator of brokers and brokerage firms—announced the sanction in a Letter of Acceptance, Waiver, and Consent (AWC).
FINRA alleged that, between September 2016 and August 2017, Holler engaged in private securities transactions that he did not disclose to his firm, Securities Service Network LLC. The transactions consisted of Holler’s selling about $1.39 million of promissory notes in the Woodbridge Mortgage Investment Funds to 19 investors, nine of whom were Securities Network customers, said FINRA. The Woodbridge funds are widely reported to have been a massive Ponzi scheme.
Leading up to the suspension, in April and May of 2018, customers filed two claims collectively seeking $540,000. The claims allege Holler caused the customers losses by selling them promissory notes in either the Woodbridge Mortgage Investment Fund 4 LLC or the Woodbridge Mortgage Investment Fund 3A LLC. The claims are pending.
Holler entered the securities industry in 1977. He was registered as a General Securities Representative with Securities Service Network LLC from November 2001 through August 2017. On August 10, 2017, Securities Services publicly disclosed that it fired Holler for selling the Woodbridge Mortgage Investment Fund 3A LLC to his clients, which was not approved for sale.
Separately, the Securities Exchange Commission (SEC) brought charges against the Woodbridge Mortgage Funds and its operators. The SEC alleges the funds were a Ponzi scheme involving 235 companies used to bilk over 8,400 investors out of more than $1.22 billion. Shapiro, who controlled the companies, and others raised funds in them by promising to repay investors from high rates of interest earned on third-party loans secured by real estate, alleged the SEC. In reality, the companies generated little income from third-party loans, and huge amounts of investors’ funds were used to fund Shapiro and his family’s lavish lifestyle, said the SEC. To conceal the fraud, new funds raised were also used to make payments to other investors that were misrepresented as interest payments.
Investment Recovery Options
“Private securities transactions” occur when brokers sell or promote transactions involving securities that are not on their firm’s list of preapproved securities. Brokers must obtain approval from their firms before participating in private securities transactions, and failure to do so is a securities violation known as “selling away.” Selling away often involves risky, illiquid investments, and sometimes frauds like Ponzi schemes.
A firm, like Securities Service Network, may be liable for losses caused by its broker selling away, even if the firm is unaware of it. A firm has a duty to reasonably supervise its brokers to ensure they do not commit violations. This includes a duty to implement and maintain procedures to detect and prevent selling away. Additionally, a firm must investigate red flags of selling away.
If you purchased investments in Woodbridge Funds with Peter Holler, contact Marquardt Law Office LLC to speak with a securities attorney. You will receive a free phone consultation, and investors are represented on a contingency fee basis.
Marquardt Law Office LLC is a securities law firm representing clients nationwide in FINRA arbitration who have suffered losses due to fraud and negligence.