FINRA barred brokers Timothy Stephen Dembski and Walter Francis Grenda for fraud related to sales of Prestige Wealth Management Fund, LP. According to FINRA, the duo's fraudulent conduct included material misrepresentations and omissions, including factually misleading and/or inaccurate marketing materials.
OHO Disciplinary Proceeding #2013036168701
The report states that Dembski and Grenda improperly led investors to believe that the Prestige Wealth Management hedge fund was a "growth" fund based on a computer algorithm that would automatically include risk protection and stop-loss programs/formulas to limit losses in the fund, which would mitigate its riskiness.
FINRA wrote that Dembski and Grenda engaged in the fraud while associated with Mid Atlantic Capital Corporation and went so far as to distribute a Private Placement Memorandum (PPM) that they purportedly knew contained material misrepresentations about the Prestige Wealth Management Chief Investment Officer's professional experience.
Some of the misrepresentations related to how the fund actually worked—the PPM described how the fund traded that contradicted the way the fund operated in the real world—how it would perform—the PPM falsely portrayed that the fund had been back-tested to achieve growth (the "test" excluded fees and trading costs)—and how risky it was—it misrepresented the so-called "stop-loss" safeguard/protection.
Investigators said the PPM also omitted certain risk factors, namely that the fund was a "speculative, aggressive investment" that was not forced to follow a computer algorithm and that there was no limit on the fund's potential losses.
In fact, in its last full month of trading, the fund lost over 80% of its value.
FINRA found that multiple claims within the PPM were false. For instance, although the PPM claimed the fund's Chief Investment Officer formerly served as a Vice President for an investment company, FINRA wrote that this person was never a Vice President of an investment company, nor did the Chief Investment Officer ever previously manage a portfolio of securities.
If you have invested with Timothy Stephen Dembski, Walter Francis Grenda, the Prestige Wealth Management Fund, LP or with any broker or financial adviser whose marketing or similar materials contained significant misleading information, material misrepresentations, or omissions, and such inaccuracies or distortions of risk have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News Release: FINRA Bars Two Brokers for Fraudulent Sales of a Hedge Fund (FINRA)