Initiated By
FINRA
Allegations
Demetriou was named a respondent in a FINRA complaint alleging that he made misrepresentations to prospective investors in connection with his promotion of a Mississippi company involved in speculative real estate investments. The complaint alleges that Demetriou made numerous misrepresentations to prospective investors in sales literature that he sent to them regarding the company. Demetriou sent several promotional emails to prospective investors, including four of his member firm's customers, regarding the company's investment. The emails contained statements for which Demetriou had no reasonable basis to believe were accurate. Demetriou did not take any steps to independently verify the information contained in the emails to prospective customers and had no basis to believe the statements were accurate. Instead, without conducting any meaningful due diligence, Demetriou blindly repeated information in the emails that he had obtained from the company's representatives, including an individual who was barred from the securities industry for, among other things, securities fraud. In connection with his promotion of the company to his former member firm's customers and other prospective investors, Demetriou participated in a variety of activities related to the company. As of the date of this complaint, the company's investment has not returned any investment funds and all investor monies appear to have been lost. The coins that purportedly collateralized the company's investment were never liquidated in order to repay investors. The complaint also alleges that Demetriou participated in an undisclosed OBA. Demetriou did not provide any notice, written or otherwise, to the firm regarding his involvement with the company until its CCO asked him for a written explanation. Even then, Demetriou failed to disclose the true nature and scope of his activities related to the company, or that he served as the manager of the company for some period of time. Demetriou also failed to disclose his involvement with the company on the firm's compliance forms. By failing to disclose his activities related to the company to the firm, Demetriou also violated the firm's WSPs, which required prior written notice and approval by the firm of all OBAs. The complaint further alleges that Demetriou drafted and disseminated to firm customers consolidated financial statements and sales literature that contained inaccurate information and failed to provide a sound basis for evaluating the facts contained therein. Demetriou did not obtain principal approval or review of the sales literature and consolidated financial statements prior to use. Demetriou failed to demonstrate a sound basis for the values included on the consolidated statements and the consolidated statements did not include required disclosures. Some of Demetriou's consolidated statements also contained unclear disclosure. Demetriou never disclosed to the firm that he was preparing and disseminating consolidated financial statement to his customers. Demetriou sent promotional emails regarding the company to prospective investors that failed to provide a balanced treatment of risks and potential benefits in that the emails mitigate the inherent risks of the company's investment by presenting the numismatic coins as a feature that minimized the risk. The emails also contained statements and claims that were false, exaggerated, unwarranted or misleading. In addition, the complaint alleges that Demetriou utilized unapproved, personal email accounts to conduct securities business with the firm's customers. By utilizing unapproved personal email accounts to conduct securities business, Demetriou also violated the firm's WSPs.
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All capacities
Duration
Indefinite
Start Date
6/2/2021
Sanctions
Restitution
Amount
$337,700.00
Regulator Statement
Extended Hearing Panel decision rendered March 5, 2019 wherein Demetriou is fined $40,000, suspended from association with any FINRA member in all capacities for 21 months, and is ordered to pay $84,425, plus prejudgment interest, in restitution to customers. Demetriou is jointly and severally liable to pay the hearing costs of $14,663.78. The sanctions were based on findings that Demetriou made false or misleading misrepresentations of fact in widely distributed emails to current and former customers. The findings stated that Demetriou sent emails that contained inaccurate information and failed to provide a sound basis for evaluating the facts. Demetriou sent the emails without obtaining approval by an appropriately qualified registered principal of his firm. The findings also stated that Demetriou used unauthorized personal email accounts to conduct securities business with customers of the firm. The Hearing Panel found that FINRA failed to meet its burden of proof that Demetriou was employed or compensated as a result of an OBA. Accordingly, this cause of action was dismissed.
On March 26, 2019, FINRA appealed this decision to the NAC. The sanctions are not in effect pending review.
NAC decision rendered June 2, 2021. The NAC modified the findings and sanctions imposed by the OHO. The sanctions were based on findings that Demetriou made material misrepresentations of fact in widely distributed emails to current and former customers. The findings stated that Demetriou sent investment summaries and emails to his customers and former customers that contained inaccurate information and failed to provide a sound basis for evaluating facts. The findings also stated that Demetriou engaged in an undisclosed OBA with the limited partnership by being employed by it and serving as its managing member. The findings also included that the investment summaries Demetriou sent to customers contained inaccurate information and failed to provide a sound basis for evaluating the facts therein. FINRA also found that Demetriou used unapproved personal email accounts to conduct securities business with firm customers.
The decision became final July 5, 2021.
Broker Comment
Extended Hearing Panel decision rendered March 5, 2019 wherein Demetriou is fined $40,000, suspended from association with any FINRA member in all capacities for 21 months, and is ordered to pay $84,425, plus prejudgment interest, in restitution to customers. Demetriou is jointly and severally liable to pay the hearing costs of $14,663.78. The sanctions were based on findings that Demetriou made false or misleading misrepresentations of fact in widely distributed emails to current and former customers. The findings stated that Demetriou sent emails that contained inaccurate information and failed to provide a sound basis for evaluating the facts. Demetriou sent the emails without obtaining approval by an appropriately qualified registered principal of his firm. The findings also stated that Demetriou used unauthorized personal email accounts to conduct securities business with customers of the firm. The Hearing Panel found that FINRA failed to meet its burden of proof that Demetriou was employed or compensated as a result of an OBA. Accordingly, this cause of action was dismissed. On March 26, 2019, FINRA appealed this decision to the NAC. The sanctions are not in effect pending review. NAC decision rendered June 2, 2021 wherein Demetriou was barred from association with any FINRA member in all capacities and ordered to pay $337,700 in restitution to customers. The NAC modified the findings and sanctions imposed by the OHO. The sanctions were based on findings that Demetriou made material misrepresentations of fact in widely distributed emails to current and former customers. The findings stated that Demetriou sent investment summaries and emails to his customers and former customers that contained inaccurate information and failed to provide a sound basis for evaluating facts. The findings also stated that Demetriou engaged in an undisclosed OBA with the limited partnership by being employed by it and serving as its managing member. The findings also included that the investment summaries Demetriou sent to customers contained inaccurate information and failed to provide a sound basis for evaluating the facts therein. FINRA also found that Demetriou used unapproved personal email accounts to conduct securities business with firm customers. The bar is in effect pending finality. If no further action is taken the decision will become final July 5, 2021.
