The Financial Industry Regulatory Authority suspended a broker for nine months after he sold $625,000 in Woodbridge Group of Companies’ promissory notes to five investors without first seeking approval from Sigma Financial, the firm he was registered with at the time.
Advisor Fredrick M. Randhahn signed a letter of acceptance, waiver and consent on Thursday in which he agreed to the suspension and to pay a $5,000 fine. He also agreed to disgorgement of the nearly $33,200 in commissions he received from the transactions plus interest.
Between June 2016 and September 2017, “Randhahn solicited investors to purchase promissory notes relating to” the Woodbridge Group, a “purported real-estate investment fund,” FINRA said.
The Securities and Exchange Commission found Woodbridge actually operated as a massive Ponzi scheme from July 2012 through December 2017. In October, ex-Woodbridge CEO Robert Shapiro was sentenced to 25 years in prison by a federal judge in Miami for leading the $1.2 billion fraud scheme that hurt some 8,400 investors.
Two of the five investors whom Randhahn sold the $625,000 of Woodbridge notes to were also clients of Sigma, FINRA said, noting that Randhahn also personally invested $125,000 in Woodbridge notes.
He participated in those private securities transactions without providing prior written notice to Sigma, violating FINRA Rules 2010 and 3280.