Finra has sanctioned a former registered representative whom it said recommended GPB private placements that were excessively high-risk and concentrated to multiple elderly clients.
In a settlement agreement published Wednesday, Finra outlined how former Christopher J. Shaw's actions resulted in significant portions of his clients' portfolios being concentrated in illiquid, speculative investments from GPB Capital Holdings.
In August, a 12-person jury found two senior executives at the center of the scheme to sell $1.8 billion of GPB Capital private placements, David Gentile and Jeffry Schneider, guilty of multiple fraud counts following a dramatic seven-week trial.
As outlined in his BrokerCheck Profile, Shaw first registered with Finra in 2005, and subsequently worked for Kalos Capital, Inc. from 2011 to 2019. After leaving Kalos, he continued to be registered with two different Finra member firms until May 2023. His registration was voluntarily terminated in May 2023.
According to Finra's AWC letter, Shaw made several unsuitable recommendations in GPB private placements – described in their offering documents as "highly speculative investments which involve a high degree of risk of loss of the entire investment" – between May 2016 and September 2017. During this period, he hawked those investments to five customers, even though these clients did not meet the financial qualifications for such high-risk investments.
The GPB Capital securities were sold under Regulation D of the Securities Act of 1933, meaning they should only have been available to accredited investors, but none of the clients he recommended those investments to fit that requirement. Finra found that Shaw's recommendations exposed to his clients to excessive risk given their investment profiles, which included moderate risk tolerances, retirement status, and relatively modest net worths.
In total, Shaw’s clients invested $804,000 in GPB Capital limited partnerships. One client, a 63-year-old retiree who was reportedly investing for income, placed $254,000 across three GPB Capital partnerships. Another couple, both 64 years old and retired, allocated $210,000, while a 68-year-old client preparing for retirement committed $250,000. The last customer, aged 64, made a single investment of $90,000.
All in all, each of the clients ended up with more than 30 percent of their liquid net worth concentrated in alternative investments, according to Finra.
"Shaw's recommendations were unsuitable because they resulted in a level of concentration of the customers' liquid net worth in alternative investments that was not suitable for their investment profiles," Finra stressed.
Without admitting to or denying the findings, Shaw agreed to multiple sanctions including a three-month suspension from associating with any Finra member firm, a $5,000 fine, and paying restitution of $16,357.60 to one affected client. Other clients had already settled arbitration claims related to the GPB Capital investments, Finra noted.
The sanctions against Shaw come on the heels of another episode in Arizona, in which the Arizona Corporation Commission revoked the license of a Scottsdale investment advisor rep who reportedly sold more than $10 million of GPB private placements to nearly 100 investors over a four-year period.
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