FINRA Upholds Bar on Broker Accused of Fraud

The Financial Industry Regulatory Authority’s National Adjudicatory Council on Wednesday upheld a FINRA Extended Hearing Panel’s decision from a year ago that the owner of a San Marino, California, advisory firm had violated FINRA rules and misled investors and, therefore, warranted being barred from associating with any FINRA member in any capacity.

Robert R. Tweed had appealed a July 5, 2018 decision by the FINRA Extended Hearing Panel that found the broker, owner of Tweed Financial Services, negligently misrepresented and failed to disclose material facts concerning the sale of interests in Athenian Fund, a private investment fund he created and controlled, and that he took part in conduct that functioned as fraud or deceit on Athenian investors.

The panel found that, between November 2009 and March 2010, Tweed obtained more than $1.6 million from 23 retail customers via a “false and misleading private placement memorandum” that he used to offer and sell interests in the Athenian Fund, FINRA said. For that “misconduct, the majority of the Panel bars Tweed from associating with any FINRA member firm in any capacity and imposes a $50,000 fine,” FINRA said at the time.

Tweed, however, appealed the hearing panel’s findings that the disciplinary proceeding was timely and the sanctions it imposed, FINRA pointed out in the Dec. 11 decision of its NAC.

FINRA’s NAC concluded in its 22-page decision that Tweed violated Securities Act Sections 17(a)(2) and (3) and FINRA Rule 2010.

As a result, FINRA’s NAC said: “We bar Tweed in all capacities for this misconduct.” Tweed was also ordered to pay hearing costs of $5,196.

The Securities and Exchange Commission had filed fraud charges against Tweed and his firm Oct. 2, 2017, accusing them of misleading investors about the profitability of the same fund they managed until SEC examiners discovered the fraud. The complaint alleged Tweed Investment Services and Tweed himself formed Athenian Fund and raised more than $1.7 million from 24 investors, ThinkAdvisor reported at the time.

According to the SEC complaint, the investor funds were supposed to be invested in a master fund that would use a quantitative stock trading strategy. Instead, according to the complaint, Tweed and his firm invested the funds in two other investments that ultimately lost about $800,000, and then concealed those losses from the investors by issuing false and misleading account statements that made the fund appear as if it was profitable.

The complaint also alleged investors who were able to redeem their interests received more money than they were entitled to because their redemptions were based on inflated asset values. The complaint further alleged that Tweed and his firm misled investors for years, and only disclosed the losses after SEC examiners and state regulators uncovered the fraud during routine examinations. The complaint sought permanent injunctions and civil penalties. The outcome of the case was still pending as of Dec. 12, according to the SEC’s website.

There are 16 disclosures on Tweed’s profile at FINRA’s BrokerCheck website. Over the course of his 26 years of securities experience at 11 FINRA member firms, including Cabot Lodge Securities in New York since 2015, he faced 13 customer disputes, the last three of which are still pending. Those three include requests for damages of $75,000 for poor performance of an investment in a fund, $500,000 for “unsuitable recommendations,” and $1.4 million for alleged misrepresentation and suitability of an investment made in March 2015.

Tweed and Cabot Lodge Securities didn’t immediately respond to requests for comment.