The Financial Industry Regulatory Authority (FINRA) recently named Eugene Kim, a broker at National Securities Corporation, as a respondent in a complaint. The complaint alleges that Kim engaged in unethical conduct, acted in bad faith, and misused customer funds in connection with a private placement offering sold by his member firm.
Details of the Alleged Misconduct
According to the complaint, Kim proposed to his firm’s commitment committee that the firm initiate a private placement offering through a firm-affiliated fund for shares in a private company at a maximum price-per-share of $9.75. However, at the time Kim submitted the offering for approval, he had not confirmed a source of shares for the offering at any price. Despite this, the firm approved the offering, and sales representatives solicited investors and distributed offering documents stating that the sole purpose of the offering was to invest in the shares at a maximum price of $9.75 per share.
Ultimately, customers invested a total of $4.055 million. Prior to closing on escrow, Kim did not source shares for the offering at any price, let alone a maximum share price of $9.75. Instead of refunding investors, Kim initiated the closing of escrow for the offering and received a $16,220 commission.
In the following months, Kim allegedly misled firm principals, representatives, and, indirectly, customers, into believing that the fund had purchased shares at the maximum share price. Ten months after the offering’s closing, Kim purchased a limited number of shares at an average price of $20.22. Even then, over $1 million in investor capital remained in cash, as Kim was unable to find enough shares to purchase with the customers’ investments.
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Uncovering the Misconduct
Kim’s firm eventually uncovered his misconduct and notified investors that they had not, in fact, purchased shares at the maximum share price. Instead, investors owned shares at a higher price and some of their funds had not been used to purchase the company shares at all.
Recovering Losses with FINRA Arbitration
Investors who have suffered losses due to broker misconduct can often recover their losses through FINRA arbitration. FINRA operates the largest securities dispute resolution forum in the United States and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute.
- The arbitration process is generally faster and less expensive than litigation.
- It can provide a simpler way for investors to resolve disputes, especially for smaller claims.
- Investors do not need an attorney to file an arbitration claim.
- The process includes a hearing before a panel of arbitrators who listen to both sides, review evidence, and then make a decision.
Victims of broker misconduct like the alleged actions of Eugene Kim should consider consulting with a securities arbitration lawyer to explore their options for recovery through FINRA arbitration.
Investor protection is a key aspect of FINRA’s mission. In cases like this, the arbitration process can play an important role in helping investors recover their losses.