January 16, 2018
Fraudulent Investment Fund
On December 27, 2018, the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers barred former registered representative David Braeger for misusing and converting customer investment funds and making misrepresentations to his customers regarding the value and status of their purported investments.
According to his FINRA BrokerCheck report, Braeger was associated with Newport Coast Securities, Inc. in Irvine, California from October 2008 to January 2012, during the time of the misconduct. Braeger was associated with three other FINRA member firms between January 2012 and July 2014: Accelerated Capital Group in Irvine, California, Arque Capital, LTD. in Gardena, California, and Midtown Partners in New York, New York.
According to the Extended Hearing Panel Decision, Braeger, while associated with Newport Coast Securities, solicited a married couple to invest $30,000 in a private offering of a commodities trading investment fund called Rubicon Capital Appreciation Fund (Rubicon), a limited liability company (LLC) that Braeger founded and managed. According to the Decision, Braeger knew that the check should be written to an escrow agent, yet he instructed the couple to write a check to Rubicon, along with a subscription agreement for the investment. The check was deposited in an account at the same bank that Braeger used. Braeger then allegedly provided quarterly statements to the couple for approximately one year purporting to reflect the value of their Rubicon investment, even though the investment did not exist. According to the Decision, when Braeger dissolved Rubicon in October 2010, he did not inform the couple that the fund had closed and they did not receive money from the liquidation of the fund.
The Decision also affirmed FINRA Department of Enforcement’s allegations that Braeger made written and verbal misrepresentations to the couple each year from 2010 to 2014 by providing false Schedule K-1 tax documents. These documents falsely ascribed a value and percentage share for their interest in Rubicon for tax years even though Braeger had closed, liquidated, and dissolved the LLC.
For the misconduct, the Extended Hearing Panel barred Braeger from association with any FINRA member firm in any capacity and ordered him to pay $14,816.95 in costs.
After terminating association with his FINRA member firm in 2014, Braeger raised money in a Regulation D private offering to start a business called Braeger Auto Finance. He claims that as of January 2016, he sold $8 million in notes. The Extended Panel Decision’s sanctions may affect his future ability to raise money in Regulation D private offerings.