FINRA

Braeger was named a respondent in a FINRA complaint alleging that he failed to follow customers' instructions and improperly used and converted $30,000 in the customers' funds that he obtained from the customers. The complaint alleges that the customers, a married couple, provided Braeger with funds for investment in a private offering for an entity that he founded and managed. However, instead of depositing the customers' funds into the escrow account for the entity's offering or causing them to be deposited at the escrow agent for the fund, Braeger endorsed his customers' check and caused it to be deposited elsewhere. Braeger never invested the monies as instructed and never returned them to his customers. The complaint also alleges that Braeger made written and oral intentional misrepresentations and omissions to the customers concerning the entity that he founded and managed. Specifically, Braeger misrepresented and omitted to disclose the status of the entity, falsely told the customers that the fund was open and was performing fairly, even though he had caused it to be closed and liquidated and returned funds to the entity's investors other than the two customers. Braeger also made written misrepresentations to the customers that the entity funds were frozen, unavailable or lost due to a clearing firm's bankruptcy. Braeger provided quarterly account statements to the customers, which falsely stated that their funds were invested in the entity when they were not. The customers' funds were never received into the entity's escrow account at a bank and never invested in the entity's commodities/futures accounts at the clearing firm. Braeger further misled the customers into believing their funds had been invested by providing them with annual false Schedule K-1 tax documents that falsely ascribed a value and percentage share for their interest in the entity for tax years even though Braeger had closed, liquidated and dissolved the entity.

Decision

Bar (Permanent)

All Capacities

indefinite

12/16/2019

Monetary Penalty other than Fines

$15,537.44

Extended Hearing Panel Decision rendered December 27, 2017, wherein Braeger was barred from association with any FINRA member in all capacities, and he was ordered to pay $14,816.95 in costs. The sanctions were based on findings that Braeger misused and converted his customers' investment funds, $30,000 that the customers intended to invest in a private offering for an entity that he founded and managed. The findings stated that Braeger did not invest the money in the manner the customers intended and intentionally took his customers' money for his own benefit. Braeger provides no credible explanation for what happened to the money to rebut the conclusion from this evidence that Braeger intentionally took his customers' money without authorization and used it for his own purposes. The customers, a married couple, provided Braeger with the funds for the investment and instead of depositing the customers' funds into the escrow account for the entity's offering or causing them to be deposited at the escrow agent for the fund, Braeger endorsed the customers' check and caused it to be deposited elsewhere. Braeger never invested the monies as instructed and never returned them to his customers. Braeger's misconduct was the result of intentional acts. Braeger did not inadvertently make a mistake or misdirect his customers' money. Braeger purposely told them to write the check in such a way that he could deposit it in the entity's account he controlled instead of the escrow account that he did not control. The findings also stated that Braeger made misrepresentations to his customers regarding the value and status of their purported investment. For approximately a year after receiving the check, Braeger provided quarterly statements to the customers purporting to reflect the value of their private offering investment, even though they had no such investment. Then, Braeger closed the investment fund. Braeger directed the commodities clearing firm for a private offering entity to liquidate the trading accounts and send the proceeds to the entity's account at his bank. Braeger had checks printed and sent to other investors. Braeger did not inform the particular customers that the investment fund had closed, and they received no money from the liquidation of the fund. Braeger dissolved the entity completely. Even though the entity no longer existed, Braeger continued to mislead the customers, who continued to believe that their investment was in the entity. One of the many written and oral misrepresentations Braeger made to the couple is that each year he provided the couple with false Schedule K-1s for their income tax returns. The K-1s showed that the couple held an interest in the entity and gave a specific value to the investment. In the context of trying to obtain the Schedule K-1 for a tax year, the couple came to conclude that Braeger had deceived them. They submitted a complaint to FINRA. In sum, Braeger made false and misleading statements over the course of more than five years to conceal his initial wrongdoing - the conversion of the customers' $30,000 investment. On January 8, 2018, the respondent filed with the OHO a notice of appeal; therefore the sanctions are not in effect pending the review. NAC Decision rendered December 16, 2019. he NAC affirmed the findings and sanctions imposed by the OHO. The sanctions were based on findings that Braeger misused and converted his customers' funds instead of investing them as the customers had intended, and made numerous misrepresentations and omissions of material fact to his customers about the value and status of their investment and the reasons they could not recover their funds. The decision became final on January 21, 2020.