FINRA charges Plano based Red River Securities

In a complaint filed by FINRA, and reported in September, 2015 Red River Securities of Plano, Texas and Brian Keith Hardwick were named respondents in a FINRA complaint alleging that they willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by making material misrepresentations and omissions related to joint venture offerings that were organized as general partnerships for the purpose of engaging in oil and gas drilling.

The complaint concerns five offerings by Regal Energy, LLC; Boonsville #2, Waggoner #1, Waggoner #2, Cosper #1 and Pierce #1.

The complaint alleges that Red River Securities and Hardwick misrepresented to investors that prior wells drilled were producing and profitable, when they were not; and omitted from offerings the authorizations for expenditures (AFEs)—the expected costs to complete the proposed projects—although Hardwick had prepared and relied upon the AFEs in pricing the offerings. In addition, Red River Securities and Hardwick misrepresented to investors the amount of income investors in prior wells had received by wildly inflating those prior income distributions and failed to disclose conflicts of interest to investors in offerings. The firm and Hardwick also failed to disclose to investors that they were investing in a “wildcat” well that was subject to additional specific development risks than those disclosed in the offerings for well drilling in general, and failed to disclose to the investors that Hardwick himself had written the purportedly independent geologist report in the offering documents.

The complaint further alleges that the firm and Hardwick sold unregistered securities without complying with the requirements of the offering registration exemptions, and recommended the offerings without having first obtained sufficient customer information from which to determine that the securities were suitable investments for those customers. In addition, the complaint alleges that the firm and Hardwick failed to implement and enforce adequate supervisory systems and written supervisory procedures to supervise the offer and sale of the offerings, and to address the conflicts of interest the firm and Hardwick’s participation in the offerings had created.

The claim filed by FINRA is not final, and until the allegations have been proven in a court of law, no adverse inferences should be drawn.

Red River Securities registration and disciplinary history

In order to lawfully sell investments to the public, one must either be registered or exempt from registration. Red River Securities is not currently registered with the SEC, any self regulatory organization or in any states or territories.

According to FINRA’s CRD disclosure report, Red River Securities has been the subject of three regulatory investigations.

The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.

When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.

Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.

Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.

FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).

If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.