FINRA recently suspended Dennis Mark Adam Merritt (“Merritt”), a former Wells Fargo adviser and current employee of J.W. Cole Financial, from working in the financial services industry for four months because of unsuitable investments recommended to customers.
Merritt allegedly began recommending investment in a technology startup company to his customers just days after meeting with the company’s CEO. According to FINRA, Merritt hoped to acquire future 401(k) business from the startup in exchange for recommending the company to investors as a lucrative investment opportunity, despite knowing little about the company. FINRA scolded Merritt for failing to adequately research the startup and its financial health before recommending it as an investment opportunity to customers. Merritt took only a cursory look at the company’s financial information and failed to notice that “the CEO and three other individuals owned all of the company’s…[stock], even though they had contributed no capital to the enterprise.” Despite his lack of research on the company, Merritt told customers that the investment’s value could increase by 50% to 100%.
FINRA also alleged that in total, Merritt convinced four of his customers to invest $115,000 in the company, including a 91-year-old who invested $55,000. When pitching the startup to investors, he falsely claimed he was personally invested in the company. Merritt also failed to disclose to his customers that his friend worked as a computer programmer at the company, a conflict of interest that could potentially influence his portfolio recommendations.
Merritt allegedly also violated Wells Fargo company policy that expressly prohibits its financial advisers from participating in private securities transactions. Merritt falsely claimed that he was in compliance with the firm’s private securities transaction policy during his annual attestation. He was discharged from the firm in May 2014 for “admitting to referring clients to an investment not offered through the firm.”
Without admitting or denying the alleged fraudulent activity, Merritt agreed to a settlement with FINRA. Due to his inability to pay, FINRA chose not to levy any monetary sanctions.
The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses as a result of investment and securities fraud. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.