FINRA Bans Broker Who Sold $3.5M in Woodbridge Ponzi

Blowback related to the collapse of a billion-dollar Ponzi scheme continues, as FINRA recently barred a broker for selling $3.5 million worth of promissory notes for the Woodbridge Group of Companies.

Purportedly a real estate investment scheme, the Woodbridge Group of Companies imploded last year. It was later revealed that the scheme was Ponzi-like in nature, meaning that funds from new generations of investors were used to pay returns to earlier generations. Just last month, a judge in Florida awarded more than $1 billion in damages to the thousands of victims taken in by the real estate fund.

FINRA & Judiciary Come Down Hard on Woodbridge Network

In order to strengthen the message that such schemes will not be tolerated, and will be punished tot he fullest extent of the law, the financial industry watchdog agency, FINRA, has begun to look at the role of individual brokers in shoring up the Woodbridge scam. After all, Woodbridge’s success, during which it swelled to a value of over $1.2 billion at its peak, relied heavily upon an extensive network of brokers and investment professionals who sold Woodbridge promissory notes to retail investors.

Broker Have Fiduciary Duty to Review Investments

As legal fiduciaries, these broker and financial professionals have an obligation to carefully review any investments they recommend to clients, including real estate ventures and promissory notes like Woodbridge. Moreover, these professionals were paid handsome fees for bringing in new investors. The broker recently banned by FINRA for selling more than $3.5 million in Woodbridge notes, for example, received more than $100,000 in fees for his doomed recommendations.

Woodbridge is an extreme case, where a broker has recommended a fraudulent investment asset. However, brokers are obligated to conduct suitability studies of any and all investments they recommend to clients. Even legitimate investments that are unsuitable for a given client may be in violation of FINRA and SEC rules and regulations. Just because an investment is legal and legitimate does not make it suitable.

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