FINRA

Respondent Vungarala 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.

8/9/2021

Pursuant to Article VI, Section 3 of FINRA By-Laws, and FINRA Rule 9554, Respondent Vungarala is suspended on August 9, 2021 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.

Alleged failure to know customer and recommend suitable investments, failure to disclose volume discounts, misrepresentation, breach of fiduciary duty, breach of contract, rescission

Michigan

The Administrator intends TO REVOKE THE SECURITIES AGENT REGISTRATION OF GOPI VUNGARALA under section 412(2) of the Securities Act, MCL 451.2412(2), because he has engaged in dishonest or unethical business practices in the securities industry within the previous 10 years, which supports the revocation of his securities agent registration under the above-cited provisions of the Michigan Uniform Securities Act (2002), 2008 PA 551, MCL 451.2101 et seq.

Stipulation and Consent

Civil and Administrative Penalty(ies)/Fine(s)

$10,000.00

Vungarala agrees that he will not reapply for a securities agent registration in Michigan for a period of ten (10) years after the date of entry of this Consent Order.

Purshe Kaplan Sterling Investments, Inc.

Voluntary Resignation

Vungarala was named a respondent in a FINRA complaint alleging that through his member firm, he regularly lied to his customer, a Native American tribe, regarding investments he recommended, and as a result willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010. The complaint alleges that Vungarala, as the customer's registered representative and treasury investment manager, fraudulently induced the tribe to invest hundreds of millions of dollars in non-traded REITs and BDCs, without revealing he and his firm received commissions on the sales or the availability of certain volume discounts. It further alleges that Vungarala knew that the tribe, prohibited its employees from engaging in business activities that could constitute a conflict of interest, or that could impair an employee's ability to make impartial decisions on behalf of the tribe. Notwithstanding these prohibitions, Vungarala recommended the tribe invest more than $190 million in non-traded REITs and BDCs over the course of three years, generating $11.4 million in commissions for his firm, $9.6 million of which was paid to Vungarala. The complaint also alleges that Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 when he failed to disclose to the tribe that the tribe was eligible to receive volume discounts on its non-traded REIT/BDC purchases based upon the fact that multiple trust accounts owned by the customer purchased the same offerings through the firm. As a result, the tribe failed to receive more than $3.3 million in volume discounts to which it was eligible. All of these funds, instead, went to the firm and Vungarala in the form of commissions to the detriment of the customer.

Mr. Vungarala has decided to resign from Sutterfield Financial Group, Inc. in order to dedicate his time and efforts in defending these allegations.

FINRA

Vungarala was named a respondent in a FINRA complaint alleging that through his member firm, he regularly lied to his customer, a Native American tribe, regarding investments he recommended, and as a result of these misrepresentations and omissions of material facts, Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010. The complaint alleges that in addition to serving as the customer's registered representative, Vungarala was employed by the tribe as its treasury investment manager and participated in decisions regarding the tribe's investments. Vungarala fraudulently induced the tribe to invest hundreds of millions of dollars in non-traded real estate investment trusts (REITs) and business development companies (BDCs), without revealing he and his firm received commissions on the sales (usually seven percent) or the availability of certain volume discounts. The firm's supervisory failures led it to fail to detect and prevent Vungarala's fraud. Vungarala knew that his customer, the tribe, prohibited its employees, such as himself, from engaging in business activities that could constitute a conflict of interest with the tribe, or that could impair an employee's ability to make impartial decisions on behalf of the tribe. Notwithstanding these prohibitions, and knowing that tribal leaders relied upon his recommendations as treasury investment manager, Vungarala recommended the tribe invest more than $190 million in non-traded REITs and BDCs over the course of three years, generating $11.4 million in commissions for his firm, $9.6 million of which was paid to Vungarala. Vungarala also allowed tribal leaders to believe the firm would not receive any commissions on these transactions, either, when he knew or should have known that this was their understanding. In order to induce the tribe to make these purchases, notwithstanding the tribe's prohibitions against conflicts of interests, Vungarala falsely represented to the tribe that he would not receive any commissions on purchases of the non-traded REITs and BDCs made in the tribe's accounts with the firm. The complaint also alleges that Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 when he failed to disclose to the tribe that the tribe was eligible to receive volume discounts on its non-traded REIT/BDC purchases based upon the fact that multiple trust accounts owned by the customer purchased the same offerings through the firm. As a result, the tribe failed to receive more than $3.3 million in volume discounts to which it was eligible. All of these funds, instead, went to the firm and Vungarala in the form of commissions to the detriment of the customer.

Order

Bar (Permanent)

All Capacities

Indefinite

10/2/2018

Disgorgement

$9,682,629.00

Monetary Penalty other than Fines

$15,937.31

$1,421.63

Extended hearing panel decision rendered October 25, 2017. The sanctions were based on findings that Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 by making materially false and misleading statements to conceal his commissions on investments made by a Native American tribe he was employed by to manage its investment portfolio. The findings stated that Vungarala persuaded the tribe to invest in REITs and business development companies through a broker-dealer firm where he told the tribe he "parked" his registration. As a result, he received over $9 million in commissions. Through false and misleading statements, he led the tribe to believe that he did not receive commissions on its transactions and that he had no conflict of interest. The findings also stated that Vungarala willfully misled the tribe regarding its eligibility for volume discounts, failing to disclose to the tribe that it was eligible to receive more than $3.3 million in volume discounts. Vungarala personally benefited, because the discounts would have reduced his commissions. On November 17, 2017, Vungarala appealed the OHO decision to the National Adjudicatory Council (NAC). NAC decision rendered October 2, 2018 wherein the NAC affirmed the findings and affirmed the sanctions imposed by the OHO. On October 31, 2018, Vungarala appealed the NAC decision to the Securities and Exchange Commission (SEC). SEC decision rendered November 20, 2020 wherein the findings made and the sanctions imposed by the NAC are sustained. The decision became final January 19, 2021.