FINRA

Respondent Michael Clements failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.

Letter

Suspension

All Capacities

Indefinite

Continues until required payment is made or discharged.

10/23/2018

Pursuant to Article VI, Section 3 of FINRA By-Laws, and FINRA Rule 9554, Respondent Michael Clements is suspended on October 23, 2018 for failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.

FINRA

Respondent Clements failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.

Letter

Suspension

All Capacities

Indefinite

Continues until required payment is made or discharged.

8/9/2017

Pursuant to Article VI, Section 3 of FINRA By-Laws, and FINRA Rule 9554, Respondent Clements is suspended on August 9, 2017 for failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.

Clements was named in a customer complaint that asserted the following causes of action: unsuitability and margin abuse, failure to supervise, and breach of fiduciary duty.

$50,000.00

The Award has not been paid.

Customer committed fraud, theft, failure to supervise and supervisory gross negligence,terminated for said activities filed an arbitration alleging false representation on his Form U5

$25,000.00

A $150,000 counter Claim has been filed by Respondent. Since the internal review had been completed on [customer] a significantly greater amount of supportive documents have been gather to support every allegation of theft, fraud, supervisory gross negligence and failure to supervise that is documented on his form U-5 and that his claim is not only frivolous and without any merit but [customer] committed fraud in his other arbitration responses to which he was named.

CUSTOMER IS AN EXTREMELY WEALTHY AND HIGHLY SOPHISTICATED INVESTOR WHO WAS IN DAILY CONTACT WITH HIS BROKER ON EVERY TRANSACTION AND WAS KEENLY AWARE OF ALL THE SUITABLE INVESTMENTS AND ACTIVITY HE AUTHORIZED IN HIS ACCOUNT. CUSTOMER'S ACCOUNT WAS SUPERVISED WITH HEIGHTED SCRUTINY WHICH WAS WELL DOCUMENTED. AS THE CUSTOMER LOST MONEY AND HAD RECENTLY NEGOTIATED A SETTLEMENT WITH ANOTHER BROKER DEALER FOR SIMILAR ACTIVITY, CUSTOMER BEGAN ATTEMPTING TO DO THE SAME WITH AVENIR. THE FIRM VIEWS THIS AS A FRIVOLOUS LAWSUIT.

$1,000,000.00

$255,000.00

MICHAEL CLEMENTS WAS NAMED TO ARBITRATION AS THE CEO AND EQUITY OWNER OF THE FIRM. CUSTOMER IS AN EXTREMELY WEALTHY AND HIGHLY SOPHISTICATED INVESTOR WHO WAS IN DAILY CONTACT WITH HIS BROKER ON EVERY TRANSACTION AND WAS KEENLY AWARE OF ALL THE SUITABLE INVESTMENTS AND ACTIVITY HE AUTHORIZED IN HIS ACCOUNT. CUSTOMER'S ACCOUNT WAS SUPERVISED WITH HEIGHTED SCRUTINY WHICH WAS WELL DOCUMENTED. AS THE CUSTOMER LOST MONEY AND HAD RECENTLY NEGOTIATED A SETTLEMENT WITH ANOTHER BROKER DEALER FOR SIMILAR ACTIVITY, CUSTOMER BEGAN ATTEMPTING TO DO THE SAME WITH AVENIR. THE FIRM VIEWS THIS AS A FRIVOLOUS LAWSUIT. Claim was settled due to potential future costs of litigation.

Unauthorized trading, Churning, excessive commissions, suitability.

$110,000.00

Michael Clements was named as an owner of the firm. The Allegations in the Arbitration are unfounded and frivolous. [Customer's] initial complaint for $9,000 in excessive commissions was settled with [customer] because it was not worth the time or expense to fight a litigation of that size. [Broker] subsequently failed to meet the full obligation and make all his settlement payments so [customer] is now inventing new allegations to justify an arbitration. All trades in his account, were not only authorized, but suitable.

Respondent was named in customer's complaint that asserted the following causes of action: unauthorized trading, breach of fiduciary duty, churning, manipulation, misrepresentation, suitability, failure to supervise, negligence, indemnification, theft, recovery of commissions, swindle, and forgery. The causes of action related to Claimant's allegations that Respondents purchased shares in his account and traded on margin without his permission. Claimant further alleged that Respondents falsified account documents to allow for trading other than the single purchase of Fibrocell Science stock, which he had authorized.

$148,876.71

This award has not been paid by or on behalf of Michael Clements as of October 23, 2018.

Clements was named because he was an officer of the firm and potential owner.

FINRA

CLEMENTS WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HIS MEMBER FIRM, HE AS ITS FOUNDER, CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF COMPLIANCE OFFICER (CCO), AND A REPRESENTATIVE, COMMITTED FRAUD IN THE SALE OF EQUITY OR PROMISSORY NOTES OF THE FIRM OR ITS BRANCH OFFICES, AND THE CCO AIDED AND ABETTED FRAUD. MOST OF THE SALES WERE TO ELDERLY CUSTOMERS OF THE FIRM, AND THE RESPONDENT'S CAPITAL RAISING PRACTICES ARE CONTINUING. THE COMPLAINT ALLEGES THAT CLEMENTS DIRECTED THE REPRESENTATIVE TO CONTACT HIS CUSTOMERS REGARDING INVESTING IN THE FIRM, AND TO OFFER A ONE PERCENT INTEREST IN THE FIRM FOR EVERY $50,000 INVESTED, WITHOUT EXPLAINING ANY BASIS FOR THE PRICE OF THE EQUITY OR PROVIDING THE REPRESENTATIVE WITH ANY INFORMATION REGARDING THE FIRM'S FINANCIAL CONDITION, RECENT INVESTMENTS IN THE FIRM AT FAR LOWER PRICES, OR A PLAN OF ACTION THE FIRM SUBMITTED TO ITS CLEARING FIRM. ONE OF THE INVESTORS THE REPRESENTATIVE SOLICITED AGREED TO INVEST $250,000 FOR A FIVE PERCENT EQUITY INTEREST IN THE FIRM. IN CONNECTION WITH THE SALE OF THE FIRM'S EQUITY TO THIS INVESTOR, THE FIRM, THROUGH HIM, KNOWINGLY OMITTED A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE TO THE INVESTOR NOT MISLEADING. SPECIFICALLY, THE FIRM, THROUGH THE REPRESENTATIVE, FAILED TO DISCLOSE THAT IT WAS FACING A DIRE REGULATORY CAPITAL SITUATION AS A RESULT OF A $190,000 MARGIN CALL AND FACED THE PROSPECT THAT IT WOULD SOON FAIL ITS REGULATORY CAPITAL REQUIREMENT. CLEMENTS PREPARED THE INVESTOR'S PURCHASE AGREEMENT, WHICH CONTAINED THE TERMS OF THE INVESTOR'S INVESTMENT. THROUGH THE INVESTOR'S PURCHASE AGREEMENT, CLEMENTS KNOWINGLY REPRESENTED THAT THE PURCHASE PRICE OF A ONE PERCENT SHARE IN THE FIRM WAS $50,000, WITHOUT DISCLOSING THAT AN ELDERLY INVESTOR PAID HALF THAT PRICE 22 DAYS EARLIER AND THAT HIS MOTHER PAID A SMALL FRACTION OF THAT PRICE 27 DAYS EARLIER. THE FACT THAT THE FIRM SOLD THE EQUITY INTERESTS IN THE FIRM AT FAR LOWER PRICES WITHIN THE PREVIOUS MONTH WAS A MATERIAL FACT. BY ENGAGING IN THE FOREGOING CONDUCT, THE RESPONDENT WILLFULLY VIOLATED SECTION 10(B) OF THE EXCHANGE ACT AND RULE 10B-5. THE COMPLAINT ALSO ALLEGES THAT PRIOR TO THE REPRESENTATIVE'S SOLICITATION OF THE INVESTOR'S $250,000 INVESTMENT IN THE FIRM, CLEMENTS DIRECTED THE REPRESENTATIVE TO RAISE EQUITY FROM CUSTOMERS, INCLUDING THE INVESTOR, AND TO STATE THAT INVESTED FUNDS WOULD BE USED FOR THE FIRM'S DAY-TO-DAY OPERATIONS AND GROWTH. THE REPRESENTATIVE DID SO. HOWEVER, AS CLEMENTS WAS AWARE, THE FIRM WAS FACING A REGULATORY CAPITAL CRISIS AND NEEDED THE INVESTOR'S INVESTMENT TO MEET ITS NET CAPITAL REQUIREMENT AND AVOID ANOTHER SUSPENSION OF ITS SECURITIES BUSINESS. THIS WAS A MATERIAL FACT TO THE INVESTOR. PRIOR TO ANOTHER REPRESENTATIVE'S SOLICITATION OF INVESTORS TO PURCHASE EQUITY OR DEBT FROM A HOLDING COMPANY OF THE FIRM'S BRANCH OFFICE, CLEMENTS ADVISED THIS REPRESENTATIVE THAT HE COULD TREAT INVESTOR FUNDS AS HIS OWN. CLEMENTS ALSO KNEW, FROM HIS REVIEW OF THE SENIOR PROMISSORY NOTES ISSUED TO INVESTORS THAT THE REPRESENTATIVE PROMISED TO USE THE PROCEEDS FOR GENERAL OPERATING EXPENSES AND GROWING THE HOLDING COMPANY. CLEMENTS WAS OR SHOULD HAVE BEEN AWARE, FROM HIS REVIEW OF THE COMPANY'S FINANCIAL RECORDS, THAT THE REPRESENTATIVE WAS ACTUALLY USING PROCEEDS FROM EQUITY INVESTMENTS AND PROMISSORY NOTES FOR THE REPRESENTATIVE'S PERSONAL NEEDS. THE USE OF THE COMPANY'S INVESTMENT PROCEEDS FOR THE REPRESENTATIVE'S PERSONAL NEEDS WAS A MATERIAL FACT TO INVESTORS. ACCORDINGLY, CLEMENTS PROVIDED KNOWING AND SUBSTANTIAL ASSISTANCE TO THE REPRESENTATIVE IN HIS FRAUDULENT SALE OF THE FIRM'S EQUITY TO AN INVESTOR AND TO THE OTHER REPRESENTATIVE IN HIS FRAUDULENT SALES OF EQUITY OR DEBT IN THE HOLDING COMPANY TO INVESTORS. BY ENGAGING IN THE FOREGOING CONDUCT, CLEMENTS AIDED AND ABETTED VIOLATIONS OF SECTION 10(B) OF THE EXCHANGE ACT OF 1934, RULE 10-5 THEREUNDER.

Decision

Bar (Permanent)

All capacities

Indefinite

5/17/2018

any principal or supervisory capacity

Indefinite

5/17/2018

Monetary Penalty other than Fines

$20,676.56

Restitution

$350,000.00

Extended Hearing Panel decision rendered September 20, 2016 wherein Clements is barred from association with any FINRA member firm in all capacities; ordered, jointly and severally, to pay hearing costs in the amount of $19,130.96; and ordered to offer rescission to defrauded customers of their equity interests at the original purchase price (minus any dividends or interest payments received), plus interest from the date of purchase. The sanctions are based on findings that Clements, his member firm, and a registered representative of the firm willfully violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and FINRA Rules 2020 and 2010 by making material omissions to a firm customer in connection with the customer's purchase of an equity interest. The findings stated that Clements and the firm, acting through Clements, willfully violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and FINRA Rules 2020 and 2010 by making material misrepresentations and omission to another firm customer in connection with the customer's equity interest purchase. The findings also stated that the firm and Clements failed in numerous respects to reasonably supervise the firm and the capital raising activities of a holding company owned by the firm. The aiding and abetting charges and the misuse of customer funds charges are dismissed. On October 14, 2016, Clements filed a notice of appeal to the NAC. On October 31, 2016, FINRA notified Clements that his response did not comply with FINRA Rule 9311(c) and provided him 14 days to correct his notice of appeal and refile it. On November 14, 2016, Clements filed an amended notice of appeal to the NAC. The sanctions are not in effect pending the review. NAC Decision rendered May 17, 2018, wherein the NAC modified the sanctions to order restitution instead of rescission and impose the bar in any principal or supervisory capacity, and affirmed the findings imposed by the Office of Hearing Officers (OHO). The sanctions were based on findings that Clements made material misstatements and omissions of material fact in connection with the sale of his member firm's equity interests and failed to reasonably supervise the firm's and a holding company's capital raising efforts. The decision became final June 19, 2018.

THE ALLEGATIONS ARE COMPLETELY INACCURATE, MALICIOUS AND SLANDEROUS. CLEMENTS PLANS ON DEMONSTRATING SUCH AND TAKING ALL ACTIONS NECESSARY TO DEFEND AND CORRECT THIS PERSONAL ATTACK ON HIM AND THE FIRM HIS WORKS FOR.