FINRA Regulatory Complaint Filed Against Investment Adviser and Former Westpark Capital, Inc. Broker, Gregory McCloskey, for Making Private Securities Transactions
Investment adviser Gregory McCloskey (CRD#: 2820510) was employed as a broker by Westpark Capital, Inc. from 2016 until October 7, 2019, when he was permitted by the firm to resign after failing to adhere to a heightened supervision plan. Gregory McCloskey was a broker with Newport Coast Securities from 2007 until 2016.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on December 20, 2020, a formal regulatory complaint seeking sanctions was filed against Gregory McCloskey. It is alleged that Gregory McCloskey participated in private securities transactions, provided false information and false on-the-record testimony to FINRA, attempted to obstruct a FINRA investigation, used an unapproved email address that led to member firms’ inaccurate books and records, made false or misleading statements to FINRA, and made false or misleading statements on a firm compliance questionnaire.
According to the FINRA complaint, “McCloskey was named a respondent in a FINRA complaint alleging that he participated in two undisclosed private securities transactions (PSTs) involving a customer, who was an elderly, retired widow, and then sought to conceal these transactions from his member firms and FINRA.
“The complaint alleges that McCloskey solicited the customer to purchase $20,000 in shares of stock of a company. McCloskey never disclosed the transaction to his member firm. The customer’s investment in the company took place outside the regular course or scope of McCloskey’s employment with the firm. The customer’s investment in the company eventually surfaced because she sent a written complaint to McCloskey at his firm business address about her investment. The customer’s complaint prompted McCloskey to participate in a second PST. To appease the customer and further attempt to conceal his misconduct, McCloskey arranged to have his sister purchase the customer’s $20,000 investment in the company’s stock. McCloskey never disclosed this PST to his firm. McCloskey also failed to timely disclose the written customer complaint.
“The complaint also alleges that McCloskey provided false information and false on-the-record testimony to FINRA. In connection with FINRA’s investigation that led to a previous AWC, FINRA requested that McCloskey provide a list of all firm customers who invested in the company, whether or not he participated in the purchase. McCloskey provided FINRA with a signed response to the request in which he identified three of his firm customers by name as the only firm clients who made their own direct investments in the company. McCloskey failed to identify the customer described above as one of those customers. During subsequent on-the-record testimony, McCloskey identified the same three customers he had identified in his written response and again omitted the customer described above.
“The complaint further alleges that McCloskey attempted to obstruct FINRA’s investigation. During a phone call, McCloskey urged the customer to create and sign a false written statement indicating that McCloskey did not participate in any manner in the customer’s $20,000 investment in the company’s stock. In exchange, McCloskey offered to let the customer keep the $20,000 she received from his sister in the PST, and to also keep her shares of stock in the company. The customer refused to agree to McCloskey’s proposal.
“In addition, the complaint alleges that McCloskey used an unapproved email address for securities-related communications with the customer. As a result of McCloskey’s failure to disclose or receive approval to use his unapproved email address to communicate with a firm customer, the firm was unable to review and preserve the email communications McCloskey sent to or received from the customer.
“Moreover, the complaint alleges that McCloskey falsely responded to four questions on a personal activity questionnaire that his firm submitted to FINRA. McCloskey misled FINRA on the questionnaire by falsely attesting that while associated with a member firm he had not received any complaints against him from a customer during the past 12 months, utilized a third-party communication system, such as a third-party email address to communicate with customers, engaged in any PSTs, prepared and distributed personalized account statements, consolidated statements or performance reports separate and apart from the account statements prepared and distributed by his member firm.
“Furthermore, the complaint alleges that McCloskey falsely stated on his annual compliance questionnaire that he had not solicited, sold, or participated in any PSTs during the past 12 months.”
For a copy of Gregory McCloskey’s FINRA disciplinary action details, click here.
Summary Detail of Allegations
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), prior to his separation from Westpark Capital, Inc., on October 7, 2019, a client of Gregory McCloskey’s made a complaint to his member firm on April 30, 2018, alleging misrepresentation, suitability concerns, and high fees. The customer requested damages in the amount of $20,000.
On May 1, 2017, FINRA issued a 15-day suspension and $5,000 fine against Gregory McCloskey. According to the FINRA sanction, “Without admitting or denying the findings, McCloskey consented to the sanctions and to the entry of findings that he participated in a series of private securities transactions without providing written notice to or receiving approval from his member firm to engage in such activity. The findings stated that specifically, McCloskey, without his firm’s approval, personally invested $50,000 in a lighting and energy networking company and introduced two of his customers to the company, and they invested a total of $50,000. McCloskey did not receive any selling compensation.” The suspension began on June 5, 2017, and the fine was paid on January 17, 2018.
For a copy of Gregory McCloskey’s FINRA BrokerCheck in these cases, click here.
The Risks of Private Securities Transactions for Investors
FINRA strictly prohibits financial advisers from engaging in private securities transactions or selling securities and other investments to clients that are not offered through the brokerage by which they’re employed, also called “selling away”. Private securities have not been vetted by the adviser’s member firm, a process that requires rigorous due diligence to protect investors. This process generally produces research that can be shared with clients for their review in decision-making.
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 firstname.lastname@example.org.