The Financial Industry Regulatory Authority Inc. has barred another broker who sold notes to clients in what turned out to be a real estate Ponzi scheme.
The broker, Frank Dietrich, sold investors $10.8 million worth of promissory notes issued by the Woodbridge Group of Companies,
which last year filed for Chapter 11 bankruptcy protection, according to Finra.
Last year, the Securities and Exchange Commission charged the Woodbridge Group with running a $1.2 billion Ponzi scheme that targeted 8,400 investors.
Mr. Dietrich is the fourth broker who sold Woodbridge notes that
Finra has barred in the past few months. Many of the salesmen who sold the notes
were former brokers who dropped their securities licenses or who had been barred from the industry. It was pitched to investors as a safe alternative to stocks.
Mr. Dietrich's attorney, Jon Jacobson, did not return a call to comment. Mr. Dietrich consented to the Finra settlement without admitting to or denying Finra's findings.
Mr. Dietrich sold the Woodbridge notes to 58 investors, 30 of whom were firm customers, according to Finra. He received $261,000 in commissions from the sales, Finra stated.
According to industry rules, brokers must tell their broker-dealers they are selling private securities or participating in a private securities transaction. Mr. Dietrich did not tell his firm, Quest Capital Strategies Inc., that he was selling the Woodbridge notes,
according to the Finra settlement.
According to his BrokerCheck report, Quest Capital Strategies permitted Mr. Dietrich to resign in March for not disclosing outside business activities and for selling an unapproved product. He has seven pending arbitration claims against him relating to the sale of the Woodbridge notes, according to BrokerCheck.
Earlier this month, Robert Shapiro, former CEO of the Woodbridge Group, agreed to pay $120 million to the SEC to settle allegations that he defrauded investors in the $1.2 billion real estate scheme that drove his company into bankruptcy, according to court papers. Mr. Shapiro didn't admit to or deny the allegations.
