Former Westpark Capital, Inc. Broker, Hary Datys, Suspended By FINRA For Fifteen Months For Allegedly Failing To Conduct Due Diligence Before Selling Promissory Notes
Hary Datys (CRD # 1877750) was a Financial Advisor at Westpark Capital, Inc. in New York, NY. Hary Datys was in the securities industry from 1990 to 2020. Harry Datys worked for eight different brokerage firms including Sterling Financial Investment Group, Inc. (expelled by FINRA), Joseph Stevens & Company, Inc., and GKN Securities Corp.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on September 8, 2020, Hary Datys was sanctioned by FINRA, suspending him for fifteen months and fining him $20,000. According to the FINRA sanction:
“Without admitting or denying the findings, Datys consented to the sanctions and to the entry of findings that, in connection with securities offerings, he offered and sold promissory notes issued by his member firm’s parent company to customers and lacked a reasonable basis to recommend the notes. The findings stated that Datys raised a total of $2,713,200 and obtained commissions of $183,000…. Datys did not conduct reasonable due diligence on the offerings and failed to understand the risks they presented. Datys did not perform a reasonable review of information about the company’s financial condition or operations. …The findings also stated that Datys acted in contravention of Section 17(a)(2) and (3) of the Securities Act of 1933 by making negligent misrepresentations and omissions of material information in connection with the sale of the offerings. While soliciting investments, Datys negligently claimed that noteholders were entitled to share in pro-rata distributions of equity and profits from the firm, which had higher profits and greater equity-producing opportunities than the company, the actual issuer and source of profits and equity for the noteholders. Datys negligently misrepresented that noteholders would receive stock or warrants for every deal in which the firm participated, including the firm’s private placements and IPOs. In addition, Datys negligently failed to disclose conflicts of interest that presented risks. Additionally, to solicit investments, Datys emailed customers a false historical analysis that he obtained from the CEO and negligently misrepresented that it showed investors what they could expect as a return on the notes, without disclosing that the information it contained was hypothetical, rather than historical.”
For a copy of the FINRA sanction, click here
Promissory notes are a form of alternative investments. Alternative investments, or private placement investments, is a broad term that describes securities that are not offered for sale through a public exchange. These can include promissory notes, private equity offerings, small, start-up businesses, etc. Alternative investments are often issued under Regulation D under the Securities Act of 1933. Regulation D provides exemptions from the more rigorous Securities and Exchange Commission (SEC) registration requirements and allows companies to offer and sell securities without extensive disclosures. The absence of standard disclosure requirements often creates.
The Securities Exchange Commission, federal courts, and FINRA have all found that brokerage firms have a duty to conduct a reasonable investigation concerning the private placements issuer’s representations concerning the security. A brokerage’s firm’s due diligence obligation also stems from suitability obligations requiring the broker to have reasonable grounds to believe that a recommendation to purchase, sell or exchange a security is suitable for the customer. In order to meet the due diligence obligation, the brokerage firm and/or financial advisor must make reasonable efforts to gather and analyze information about the private placement, the issuer and its management, the business prospects of the issuer, the assets held by or to be acquired by the issuer, the claims being made by the issuer in the offering materials, and the intended use of proceeds of the offering. The failure to determine this and other material information would necessarily preclude a financial advisor from disclosing to a customer the material aspects of a transaction.
In addition to the foregoing, Hary Datys was sanctioned twice by the New Jersey Bureau of Securities following allegations. In April 2014 Hary Datys was fined $15,000 after allegedly
“CONTINUED TO ACTIVELY TRANSACT BUSINESS IN ACCOUNTS OF NEW JERSEY RESIDENTS AFTER HIS REGISTRATION WAS REVOKED. ALTHOUGH THE BUREAU REVOKED DATYS’ REGISTRATION, BETWEEN MAY I5, 2008 AND AUGUST OF 2012, DATYS ACCEPTED NUMEROUS ORDERS FOR SECURITIES TRADES IN ACCOUNTS OF UP TO FOUR NEW JERSEY RESIDENTS. EVEN THOUGH DATYS WAS NO LONGER REGISTERED WITH THE BUREAU, HE CONTINUED TO COMMUNICATE WITH CLIENTS WHO WERE NEW JERSEY RESIDENTS AS AN AGENT OF WESTPARK. BETWEEN MAY OF 2008 AND NOVEMBER OF 2010 DATYS HAD SEVERAL EMAIL COMMUNICATIONS, REGARDING INVESTMENTS, WITH CLIENTS WHO WERE NEW JERSEY RESIDENTS. AFTER REVOCATION, DATYS CAUSED NEW JERSEY CLIENTS’ ADDRESSES TO BE CHANGED TO NEW YORK COMMERCIAL LOCATIONS. ACCORDING TO WESTPARK’S SUPERVISORY PROCEDURES MANUAL ”WSP” “[I]T IS UNACCEPTABLE FOR A CUSTOMER TO CHANGE AN ADDRESS TO A P.O. BOX OR OTHER LOCATION NOT INDICATIVE OF THE CUSTOMER’S TRUE STREET ADDRESS AND REGISTERED REPRESENTATIVES ENTERING CUSTOMER ADDRESS CHANGES OF THIS NATURE IN THE RECORD WITHOUT PRIOR CLEARANCE WILL BE SUBJECT TO FURTHER INQUIRY AND ASKED FOR A FULL EXPLANATION.” ADDITIONALLY, WESTPARK’S WSP STATE “REGISTERED REPRESENTATIVES MUST BE REGISTERED IN THE STATE FROM WHICH THEY CONDUCT BUSINESS AND MAY BE REQUIRED TO BE REGISTERED IN OTHER STATES WHERE CUSTOMERS ARE DOMICILED … , AND FURTHER THAT “[N]O REGISTERED REPRESENTATIVE MAY SOLICIT OR CONDUCT SECURITIES TRANSACTIONS IN A GIVEN STATE BEFORE SUCH INDIVIDUAL HAS BEEN APPROVED TO CONDUCT SECURITIES BUSINESS IN THAT STATE.” DESPITE THE OBLIGATIONS SET OUT IN THE WSP, DATYS CAUSED UP TO FOUR CLIENTS, WHO WERE NEW JERSEY RESIDENTS, TO CHANGE THEIR PRINCIPAL ADDRESS OF RECORD TO NEW YORK BUSINESS LOCATIONS IN ORDER TO CONTINUE TO DO BUSINESS WITH THEM WITHOUT BEING REGISTERED IN NEW JERSEY.” Harry Datys was fined $15,000. In June 2018 Harry Datys was fined $6,000 following allegations that “DATYS VIOLATED HIS SUPERVISORY AGREEMENT BY FAILING TO INFORM THE BUREAU OF NEW DISCLOSURE.”
According to publicly available records released by FINRA, in addition to the above sanctions, Harry Datys has been the subject of fifteen customer complaint disclusres alleging sales practice misconduct:
• February 2017—”Excessive and Unsuitable Trading without Diversification & false and misleading statements.” The matter settled for $6,000.
• April 2016—”[Customer] invested in a private offering in December 2012 and is now alleging WPC was involved in among other things, various acts of negligence, breach of fiduciary duty, lack of suitability and failure to supervise.” The matter settled for $50,000.
• September 2014—”[CUSTOMER] CLAIMES THAT HER BROKER HARRY DATYS MISREPRESENTED THAT A PRIVATE PLACEMENT SHE INVESTED IN WOULD GO PUBLIC IN SEPT 2014 AND THAT SHE WAS NEVER MADE AWARE THAT THE SHARES WOULD BE RESTRICTED.” The claim was denied.
• August 2014—”CLIENT CLAIMING THAT HE INVESTED IN A PRIVATE PLACEMENT AND WAS NEVER TOLD THAT HIS ENTIRE INVESTMENT COULD BE AT RISK. CLAIMING MISREPRESENTATION.” The claim was denied.
• June 2014—”NASD STATEMENT OF CLAIM ALLEGESMISREPRESENTATION, UNSUITABLE INVESTMENTS, UNAUTHORIZED TRANSACTIONS AND OTHER NASD RULE VIOLATIONS. THE BEFORE MENTIONED WAS SETTLED, BUT THE CLIENT FILED ANOTHER ARBITRATION CLAIMING THAT ORIGINAL SETTLEMENT HAD NOT BEEN FOLLOWED.” The matter settled for $400,000.
• April 2012—”[CUSTOMER] IN AN EMAIL TO HARRY DATYS CLAIMES THAT HE WAS PROMISED HE WOULD RECEIVE MONIES FROM AN INVESTMENT BACK IN WEEKS, TO WHICH HE HAD NOT RECEIVED AT THE TIME OF THE EMAIL MONTHS LATER.”
• September 2011—”ALLEGED UNAUTHORIZED TRADING IN THE CUSTOMER ACCOUNTS FROM JUNE 2005 THROUGH 2008.” The matter settled for $52,500.
• August 2006—”CUSTOMER ACKNOWLEDGED BUYING 50,000 SHARES OF NEW YORH HEALTHCARE SHARES ON 10/17/2006 AND NOT PAYING FOR THE TRANSACTION. THE LOSS RESULTED IN A $7,897 LOSS IN THE ACCOUNT. WHEN A BRIDGE LOAN WAS PAID TO THE ACCOUNT FROM ANOTHER INVESTMENT CUSTOMER WAS UNHAPPY THAT THE $7,897 LOSS WAS DEDUCTED FROM THE PROCEEDS AND CUSTOMER RECEIVED. CUSTOMER WAS SENT WAS SENT THE BALANCE OF PROCEEDS TO HIM.” The matter was closed without action.
• March 2006—”CUSTOMER COMPLAINED THAT STOCK WAS SUPPOSE TO BE LISTED ON AMEX. THE AMEX LISTING WAS APPLKIED FOR, BUT NO ASSURANCES MADE AS TO LISTING.” The matter remains pending.
• May 2005—”CUSTOMER COMPLAINED THATSTOCK WAS DOWN AND WAS NOT LISTED ON THE AMEX. AMEX LISTING WAS APPLIED FOR, BUT NO ASSURANCES MADE AS TO IF OR WHEN IT WOULD BE LISTED. The claim was denied.
• February 2004—”UNAUTHORIZED TRANSACTIONS, CHURNING, EXCESSIVE TRADING.” The matter was closed without action.
• December 2003—”EXCESSIVE AND UNAUTHORIZED TRADING FROM MAY 2003-AUGUST 2003, EXCESSIVE COMMISSIONS, MISREPRESENTATION, UNAUTHORIZED USE OF MARGIN, UNSUITABLE INVESTMENTS, FAILUTE TO FOLLOW INSTRUCTIONS.” The matter settled for $4,500.
• October 1999—”THE STATEMENT OF CLAIM ALLEGES THAT A SALE WAS NOT ENTERED FOR DATATREND, A SECURITY BOUGHT BY THE CLAIMANTS ON A UNSOLICTED BASIS.” The matter settled for $52,500.
• October 1998—”THE STAEMENT OF CALIM ALLEGES UNAUTHORIZED AND UNSUITABLE INVESTMENTS RESULTED IN LOSSES TO CLAIMANT WHEN HE MAINTAINED AN ACCOUNT AT GKN SECURITIES. AFTER THE ACCOUNT WAS TRANSFERRED TO JOSEPH STEVENS & CO. THE CLAIMANT ALLEGED THE ACTIVITY CONTINUED.” The matter settled for $45,000.
• July 1998—”THE [CUSTOMERS] ALLEGED THAT I PREACHED MY FUDICIARY RESPONSIBLITY WITH REGARD TO THE HANDLING OF THEIR ACCT.” The matter settled for $195,000.
For a copy of Harry Datys’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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