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January 18, 2019 at 10:16 AM
The Financial Industry Regulatory Authority barred Gopi Krishna Vungarala, pending appeal, for making making materially false and misleading statements to conceal his commissions on investments made by a Native American tribe he was employed by to manage its investment portfolio.
In addition to the bar, FINRA also ordered Vungarala to disgorge $9,682,629, plus interest. Vungarala has appealed the decision to the SEC. However, the bar remains in effect while under review.
Vungarala worked at Purshe Kaplan Sterling Investments in Michigan until his voluntary resignation in February 2016, according to BrokerCheck.
In addition to serving as the tribe’s registered representative, Vungarala was employed by the tribe as its treasury investment manager and participated in decisions regarding the tribe’s investments.
According to FINRA’s findings, Vungarala persuaded the tribe to invest in real estate investment trusts and business development companies through a broker-dealer firm where he told the tribe he parked his registration.
As a result, Vungarala received more than $9 million in commissions.
“Through false and misleading statements, Vungarala repeatedly led the tribe to believe that he did not receive commissions on its transactions and that he had no conflict of interest,” FINRA said.
The findings also stated that Vungarala willfully failed to disclose to the tribe that it was eligible to receive more than $3.3 million in volume discounts. Such discounts would have reduced his commissions.
FINRA Orders Commonwealth to Pay Restitution for Overcharging Customers
Commonwealth Financial Network was censured and required to provide remediation to eligible customers who qualified for, but did not receive, the applicable mutual fund sales-charge waiver.
As part of this settlement, the firm has paid restitution to eligible customers, which is estimated to total $888,337 (the amount eligible customers were overcharged, inclusive of interest).
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge.
The findings stated that these eligible customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.
FINRA also stated that the firm failed to reasonably supervise the application of sales-charge waivers to eligible mutual fund sales. The firm relied on its financial advisors to determine the applicability of sales charge waivers, but failed to maintain written supervisory procedures reasonably designed to assist financial advisors in making this determination.
In addition, the firm failed to train its financial advisors regarding the availability of mutual fund sales-charge waivers for eligible customers.
As a result of the firm’s failure to apply available sales charge waivers, the firm estimates that eligible customers were overcharged by $766,295 for mutual fund purchases made since July 1, 2009.
