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Ex-LPL Rep Who Put Clients’ Funds in Tequila Company Takes Shots From FINRA

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What You Need to Know

  • FINRA fined and suspended an ex-LPL and Royal Alliance broker for investing $815,000 of client money in a tequila company.
  • Neither firm had authorized the rep to solicit its clients or invest their funds in outside investments.
  • The tequila company's founder pleaded guilty to misleading investors and misappropriating their money.

A former broker at LPL Financial and Royal Alliance Associates has been suspended for seven months and fined $5,000 by the Financial Industry Regulatory Authority after he solicited clients and non-clients at the firms to invest in a tequila company without authorization.

Without admitting or denying FINRA’s findings, Michael Mandel also agreed to disgorge $5,635 plus interest, according to a FINRA letter of acceptance, waiver and consent that he signed on Feb. 15. FINRA signed the letter Wednesday.

After starting his career with FINRA-affiliated firms by joining UBS in July 2005, Mandel was a registered representative and broker with Advisor Group’s Royal Alliance from August 2008 until December 2015, according to his report on the industry self-regulator’s BrokerCheck website. He joined LPL as a registered rep and broker after leaving Royal Alliance.

Mandel was discharged from Randy Neumann Wealth Management, an LPL-affiliated firm in Upper Saddle River, New Jersey, on Jan. 19, 2022. According to his Investment Adviser Public Disclosure report, he “solicited and introduced customers and non-customers to investment into a Firm-unapproved company, without prior notice to or approval from Firm, in violation of Firm policy.”

LPL, Advisor Group and Randy Neumann did not immediately respond to requests for comment on Friday.

Mandel declined to comment, Stuart D. Meissner of the New York law firm Meissner Associates, who is representing Mandel, told ThinkAdvisor.

Tequila Company

Between about May 2014 and October 2016, Mandel participated in private securities transactions totaling about $815,000 without providing prior written notice to, or receiving prior approval from, his employer member firm, according to FINRA.

He participated in private securities transactions by soliciting 18 investors, seven of whom were firm customers, to invest a total of about $815,000 in a tequila production company, the FINRA AWC letter said.

Starting in about May 2014, and continuing until at least October 2016, Mandel invited investors to promotional events for the tequila company, introduced them to the company’s founder, and provided investors with documents regarding the opportunity to invest, the AWC letter said.

Mandel received $5,635 from the tequila company and he “expected to receive a portion of the founder’s equity in the company,” according to FINRA.

During the relevant period, Royal Alliance and LPL each prohibited registered reps from participating in private securities transactions, FINRA noted. “Mandel did not provide written notice to either firm prior to participating in the transactions, nor did he receive approval from either firm to participate in the transactions,” the AWC letter said.

Mandel also falsely stated on LPL’s 2016 annual compliance questionnaire that he did not participate in any private securities transactions outside of the firm, according to FINRA.

On Nov. 15, 2021, the founder of the tequila company pleaded guilty to charges that he made false and misleading statements to investors in the tequila firm and misappropriated investor funds, FINRA said.

On Feb. 17, 2021, the Securities and Exchange Commission filed a complaint in U.S. District Court for the Southern District of New York against the tequila firm’s founder, alleging he made material misrepresentations to investors in the tequila company and misappropriated investors’ funds for personal use.

The U.S. District Court issued a judgment against the founder and enjoined him from further violations of the securities laws on Dec. 3, 2021, FINRA noted.

The SEC complaint identified the company as 6 Degree Tequila, founded by Joseph Cimino of Warwick of New York.

(Image: Adobe Stock)