FINRA Files Enforcement Action Against Former Supreme Alliance LLC Investment Advisor Megurditch “Mike” Patatian for Unsuitable Recommendations
Megurditch (Mike) Patatian (CRD#: 4047060) was a previously registered Investment Advisor at Supreme Alliance, LLC, in Haschbach am Remigiusberg, Germany. He entered the securities industry in 1999 and previously worked for Westen International Securities, Inc.; Cuso Financial Services, L.P.; WM Financial Services, Inc., and Crowell, Weedon & Co.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in February 2021, FINRA filed an enforcement action against Megurditch (Mike) Patatian. The FINRA complaint states, “Patatian was named a respondent in a FINRA complaint alleging that he made recommendations to customers to purchase non-traded real estate investment trusts (REITs) that were unsuitable because he lacked a reasonable basis to recommend the product to any investor. The complaint alleges that Patatian did not understand the basic features and risks associated with the non-traded REITs and failed to conduct reasonable diligence to understand the product. Some of Patatian’s customers also had liquidity concerns and thus his recommendation to purchase an illiquid non-traded REIT was further unsuitable due to each customer’s specific situation and needs. The complaint also alleges that Patatian caused customers to incur taxes and surrender fees by recommended that the customers surrender existing variable annuity policies when he failed to understand the adverse financial consequences of the surrenders. The complaint further alleges that Patatian recommended variable annuity exchanges that were unsuitable because he failed to understand the consequences of those exchanges, including the increased cost of the new variable annuities and the fact that a return of premium death benefit was not a standard feature of all variable annuities. In addition, the complaint alleges that without a customer’s knowledge or consent, Patatian impersonated the customer in a telephone call with an insurance company to obtain the contract value and surrender fee for the variable annuity. Moreover, the complaint alleges that Patatian recorded inaccurate customer information on his member firm’s customer account and disclosure forms, including by overstating customers’ net worth and exaggerating customers’ years of investment experience. Notably, the state of the California and the REIT issuers limited the total purchase of a REIT to 10 percent of the customer’s net worth. In some instances, Patatian inflated the customer’s net worth on the firm’s REIT paperwork in order to evade the limits.”
For a copy of the FINRA disciplinary action details, click here.
In addition, Megurditch (Mike) Patatian has been the subject of nine customer complaints, including the following:
● March 2020— “REP FAILED TO DISCLOSE ARREST INFORMATION DURING PRE-HIRE PROCESS.” Megurditch (Mike) Patatian was permitted to resign from Newbridge Securities Corporation.
● July 2018—“Client alleges that he was not informed of the liquidity provisions of his investment.” The customer dispute was denied.
● July 2017—“Poor recommendations from 09/01/2016 to 06/12/2017.” The customer dispute was denied.
● June 2017 “Customer claimed he received bad advice.” The customer complaint was settled for $30,000.
● October 2015 “Client claims that she did not fully understand her VA investment at the time of purchase through a former CFS representative in December of 2011. Client alleges that she was not properly informed as to investment risk and product details and now has an immediate need for the invested principal requiring full surrender. A CFS review confirmed that all material product features and required disclosures were made both verbally and in writing as evidenced on signed documentation. As of this filing date, CFS continues to review and discuss options for resolution with the client. Accommodation settlement with client for surrender charges incurred in the amount of $492.35 as the result of a partial surrender of VA in January of 2015. Client confirmed satisfaction with reexplanation of VA and working relationship with new advisor at branch and will continue to maintain investment.” The complaint was settled for $492.35.
● June 2013 “CUSTOMER ALLEGES UNSUITABLE RECOMMENDATIONS RELATED TO SWITCHING FROM ONE PRODUCT TO ANOTHER. UNEXPECTED TAX CONSEQUENCES, AND MISREPRESENTATION OF PRODUCTS. SPECIFICALLY THE CLIENT BELIEVED A VARIABLE ANNUITY PRODUCT HAD PRINCIPAL PROTECTION AND GUARANTEED RETURNS.” The customer complaint was denied.
● May 2013 “CUSTOMER ALLEGED THAT MR. PATATIAN ENSURED HIM THAT THE VARIABLE ANNUITY PURCHASED WAS SURRENDER FREE AFTER 5 YEARS AT THE END OF 5 YEARS A 5% ANNUAL RETURN ON THE INVESTED AMOUNT WOULD BE CREDITED TO THE ACCOUNT. FURTHER, WHEN CUSTOMER ASKED ABOUT VARYING ACCOUNT BALANCE ON STATEMENTS FROM THE ANNUITY PROVIDER, MR. PATATIAN TOLD THE CUSTOMER NOT TO WORRY, THAT HIS PRINCIPAL AND %5 RETURN WERE GUARANTEED.” The customer complaint was denied.
● March 2013 “FAILURE TO FOLLOW FIRM POLICY WITH REGARDS TO FIRM TRANSACTION DOCUMENTATION.” Megurditch (Mike) Patatian was permitted to resign from Cuso Financial Services, L.P.
● August 2008 “THE CLIENT PURCHASED A VA THROUGH CFS REPRESENTATIVE PATATIAN IN MAY 2008. AT THE TIME OF PURCHASE THE CLIENT HAD PREVIOUS INVESTMENT EXPERIENCE INCLUDING VARIABLE ANNUITIES, AND SHE INDICATED THAT SHE HAD A GROWTH OBJECTIVE, A MEDIUM RISK TOLERANCE AND A TIME HORIZON OF 5-10 YEARS WITH NO PLANS TO TAKE WITHDRAWALS. THE CLIENT AFFIRMATIVELY ELECTED TO INVEST IN SEPARATE ACCOUNTS RATHER THAN INVEST IN THE 1-YEAR FIXED ACCOUNT UNTIL THE END OF THE 30 DAY RIGHT TO EXAMINE PERIOD. SHE SURRENDERED DURING THE FREE-LOOK PERIOD AND ALLEGED AN $11,715.00 MARKET LOSS. ON OR AROUND JULY 12, 2008, THE CLIENT INDICATED THAT HER SOLE REASON TO EXERCISE THE FREE-LOOK WAS “BECAUSE THE ACCOUNT WENT DOWN” IN VALUE. THE PURCHASE OF THE VA WAS SUITABLE FOR THE CLIENT AND WE DENY ANY WRONGDOING.” The complaint was settled for $8,786.30.
● August 2004 “CLIENT ALLEGES THE FINANCIAL CONSULTANT RECOMMENDED INVESTMENTS THAT WERE INCONSISTENT WITH HER NEEDS. THE INVESTMENTS WERE PURCHASED IN SEPTEMBER 2003.” The customer complaint was denied.
● March 2004 “CLIENT ALLEGES THAT THE INVESTMENTS WITHIN HIS ACCOUNT WERE CHANGED WITHOUT HIS KNOWLEDGE IN OCTOBER OF 2003.” The customer complaint was denied.
● February 2004 “EMPLOYMENT WAS TERMINATED DUE TO INCONSISTENCIES IN STATEMENTS PROVIDED TO REGIONAL SALES MANAGER.” Megurditch (Mike) Patatian was discharged from WM Financial Services. Inc.
For a copy of Megurditch (Mike) Patatian’s FINRA BrokerCheck, click here.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
● Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
● Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
● Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, other investments, financial situation and needs, tax status, and investment objectives. Other considerations include the customer’s time horizon, liquidity needs, risk tolerance, and any other information disclosed by the customer.
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recover your investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at email@example.com.
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