Erez Law is currently investigating Purshe Kaplan Sterling Investments financial advisor Gopi Krishna Vungarala regarding excessive sales charges on the purchase of non-traded Real Estate Investment Trusts (REITs) and Business Development Companies (BDCs). Vungarala was registered with Purshe Kaplan Sterling Investments in Midland, Michigan from 2007 to 2017 before he was terminated by the firm following the Financial Industry Regulatory Authority (FINRA) investigation.
In February 2017, FINRA ordered to pay Purshe Kaplan Sterling Investments $3.4 million in restitution to a Native American tribe regarding excessive sales charges on the purchase of non-traded Real Estate Investment Trusts (REITs) and Business Development Companies (BDCs), according to the FINRA statement. Purshe Kaplan was also fined $750,000 for failure to supervise the sales of the above-mentioned securities by Vungarala, who acted as the tribe’s Treasury Investment Manager responsible for managing the tribe’s investment portfolio.
During the course of the investigation, FINRA found that Vungarala regularly lied to the Native American tribe regarding his investment recommendations, violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010.
Purshe Kaplan did not adequately review the risks associated with the relationship between Vungarala’s role as managing the investment portfolio and acting as a registered representative of Purshe Kaplan. The statement also asserts that Purshe Kaplan did not maintain and enforce an adequate supervisory system and procedures to ensure compliance with securities laws and FINRA rules during the sale of securities. The firm also did not establish procedures to mitigate those risks.
Vungarala recommended the tribe investment more than $190 million in non-traded REITs and BCDs, while misrepresenting to the tribe that neither himself nor the firm would receive commissions on those purchases. In reality, FINRA found that Vungarala generated $11.4 million in commissions for Purshe Kaplan and more than $9 million in personal commissions from those investments. FINRA also found that the firm failed to identify more than 200 purchases eligible for discounts based on volume of purchases, which would have provided the tribe with more than $3.3 million in volume discounts. Purshe Kaplan also did not have procedures in place or provide guidance to Vungarala to ensure that sales volume discounts were applied appropriately.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Purshe Kaplan Sterling Investments may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against Purshe Kaplan Sterling Investments financial advisor Gopi Krishna Vungarala regarding excessive sales charges on the purchase of non-traded Real Estate Investment Trusts (REITs) and Business Development Companies (BDCs). If you were a client of Purshe Kaplan Sterling Investments financial advisor Gopi Krishna Vungarala or another firm, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.