- December 5, 2020
- Purshe Kaplan Sterling
Gopi Vungarala (CRD # 4856193) was a Financial Advisor at Purshe Kaplan Sterling Investments in Midland, MI from 2007 to 2017. Gopi Vungarala worked for American General Securities Incorporated from 2004 to 2017.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on February 4, 2016, Gopi Vungarala was barred by FINRA after he allegedly fraudulently induced a Native American tribe to invest in Non-Traded Real Estate Investment Trusts and Business Development Companies.
According to the FINRA sanction: “Vungarala was named a respondent in a FINRA complaint alleging that through his member firm, he regularly lied to his customer, a Native American tribe, regarding investments he recommended, and as a result of these misrepresentations and omissions of material facts, Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010. The complaint alleges that in addition to serving as the customer’s registered representative, Vungarala was employed by the tribe as its treasury investment manager and participated in decisions regarding the tribe’s investments. Vungarala fraudulently induced the tribe to invest hundreds of millions of dollars in non-traded real estate investment trusts (REITs) and business development companies (BDCs), without revealing he and his firm received commissions on the sales (usually seven percent) or the availability of certain volume discounts. The firm’s supervisory failures led it to fail to detect and prevent Vungarala’s fraud. Vungarala knew that his customer, the tribe, prohibited its employees, such as himself, from engaging in business activities that could constitute a conflict of interest with the tribe, or that could impair an employee’s ability to make impartial decisions on behalf of the tribe. Notwithstanding these prohibitions, and knowing that tribal leaders relied upon his recommendations as treasury investment manager, Vungarala recommended the tribe invest more than $190 million in non-traded REITs and BDCs over the course of three years, generating $11.4 million in commissions for his firm, $9.6 million of which was paid to Vungarala. Vungarala also allowed tribal leaders to believe the firm would not receive any commissions on these transactions, either, when he knew or should have known that this was their understanding. In order to induce the tribe to make these purchases, notwithstanding the tribe’s prohibitions against conflicts of interests, Vungarala falsely represented to the tribe that he would not receive any commissions on purchases of the non-traded REITs and BDCs made in the tribe’s accounts with the firm. The complaint also alleges that Vungarala willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and FINRA Rules 2020 and 2010 when he failed to disclose to the tribe that the tribe was eligible to receive volume discounts on its non-traded REIT/BDC purchases based upon the fact that multiple trust accounts owned by the customer purchased the same offerings through the firm. As a result, the tribe failed to receive more than $3.3 million in volume discounts to which it was eligible. All of these funds, instead, went to the firm and Vungarala in the form of commissions to the detriment of the customer.”
Following the FINRA sanction, on February 10, 2016, Gopi Vungarala voluntary resigned from Purshe Kaplan Sterling Investments, Inc.
On March 29, 2017, Michigan revoked Gopi Vungarala’s securities agent registration and fined him $10,000 following allegations “he had engaged in dishonest or unethical business practices in the securities industry within the previous 10 years, which supports the revocation of his securities agent registration under the above-cited provisions of the Michigan Uniform Securities Act (2002), 2008 PA 551, MCL 451.2101 et seq.”
Gopi Vungarala has a pending customer complaint disclosure alleging
“failure to know customer and recommend suitable investments, failure to disclose volume discounts, misrepresentation, breach of fiduciary duty, breach of contract, rescission.”
For a copy of Gopi Vungarala’s CRD 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.
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