FINRA files complaint against Chestnut Exploration Partners

In a complaint filed by FINRA, and reported in September, 2015 Chestnut Exploration Partners, of Richardson, Texas and Mark Allan Plummer were named as Respondents alleging that they willfully made material misrepresentations and omissions to Chestnut Exploration Partners customers who purchased securities in a private placement oil and gas offering, the Chestnut 2007 4×4 joint venture.

The complaint alleges that Chestnut Exploration Partners acted as the placement agent and broker for the sales of the securities, and Plummer owned and controlled both the firm and the managing venturer of the joint venture. The firm customers who invested in the securities have collectively lost more than $5 million, representing more than a 90 percent loss on their investment.

In addition, the complaint alleges that the firm and Plummer improperly collected funds from the investors by charging them well completion assessments for an oil and gas well that was nowhere close to being drilled or completed and, in fact, was never drilled or completed. The firm and Plummer wrongfully misused over five hundred thousand of the well completion funds, which was in direct contravention of the representations that Chestnut Exploration Partners and Plummer had made to investors in the securities’ offering document. Plummer also failed to require the managing venturer to return the misused and wrongfully transferred customer funds, even after no efforts were ever made to drill or to attempt to complete the well.

Moreover, the complaint alleges that the firm failed to address in its written supervisory procedures a system for addressing and resolving the conflicts of interests in connection with the offering. Furthermore, the complaint alleges that Plummer falsified and altered a highly important project document that FINRA had requested the firm to produce. The firm, acting with Plummer’s knowledge and at his direction, produced this falsified document to FINRA in an attempt to mislead it in the investigation in this matter. Plummer continued his scheme to mislead FINRA when he repeatedly provided false and misleading testimony about the falsified document in an on-the-record interview.

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.

Chestnut Exploration Partners registration and disciplinary history

In order to lawfully sell investments to the public, one must either be registered or exempt from registration. Chestnut Exploration Partners is registered with the SEC, one self regulatory organization and in 5o states and territories.

According to FINRA’s CRD disclosure report, Chestnut Exploration Partners has been the subject of two 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.