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Finra Accuses Broker of Duping Native American Tribe

February 10, 2016

Finra is going after a broker and his broker-dealer for allegedly fraudulently pushing a Native American tribe into illiquid products and keeping close to $10 million in commissions as a result, Law360.com writes.

In a disciplinary complaint issued last week, the regulator has accused Gopi Krishna Vungarala of failing to mention $11.4 million in commissions which he and his firm, Purshe Kaplan Sterling Investments, received on $190 million worth of non-traded real estate investment trusts and business development companies he sold from 2011 to 2015 to the unnamed tribe, the legal news service writes.

Vungarala served as the tribe’s investment manager as well as its registered representative at Purshe Kaplan, by which he was paid $9.6 million, or 84.3% of the commission, for selling REITs and BDCs from several top sponsors, according to the complaint cited by the publication.

Finra is accusing Vungarala of overcharging the tribe by $3.4 million and making the tribal leaders believe that neither he nor his firm received commissions for any of the transactions.

The industry’s self regulator further alleges Purshe Kaplan failed in its supervisory obligations to prevent Vungarala’s fraud, the service writes.

The commissions went against the tribe’s prohibition against conflict of interest, according to the complaint.

Under the rules of Finra, Vungarala and Purshe Kaplan are required to answer the claim within 45 days of filing. If the case is not subsequently settled between parties it would go on to a hearing, likely later this year. A case of this size would require a majority decision from a panel of three arbitrators.

By Alex Padalka
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