November 18, 2020
In an Order Accepting Offer of Settlement released on November 4, 2020, the Financial Industry Regulatory Authority (FINRA) Department of Enforcement settled their complaint against former registered representatives Gupreet Chandhoke and Stephen Shea alleging that they consistently failed to meet their obligations to disclose private securities transactions (PSTs) and other outside business activities (OBAs) with their member firms.
The alleged PSTs and OBAs occurred between March 2014 and August 2017 when Chandhoke and Shea were associated with Gordian Investments, LLC (March or September 2012 – September 2014), Penserra Securities (January or February 2015 – April 2016), and Arete Wealth Management (May 2016 – August 2017). All firms are located in Orinda, California.
In 2014, Chandhoke and Shea formed AlesiaTec, a Delaware corporation meant to develop and provide software for data analytics, and PFU, LLC, a Delaware holding company through which they intended to make real estate investments and lease property. Chandhoke was the CEO and Shea the President of AlesiaTec. Both conducted business activities that were in violation of their FINRA member policies including creating and distributing offering materials and soliciting investors for AlesiaTec. They also allegedly opened and maintained a bank account on behalf of PFU and made a down payment for property in February 2015.
The Complaint alleged that Chandhoke separately engaged in other unethical misconduct by holding making 37 separate cash deposits into four separate bank accounts in an attempt to evade federal reporting requirements. He also falsely stated to a member firm when opening a line of credit in the name of his entity Chandhoke Holdings, LLC that no part of the line of credit would be used to purchase, carry, or trade securities. Once Chandhoke obtained the credit, FINRA asserts that he used the proceeds from the line of credit to purchase securities in another account. Chandhoke also held a position as “board manager” at Relativity Media, LLC, the operating company of Relativity Holdings LLC, which was a “privately-held Hollywood studio with a revolutionary, fully integrated and diversified media platform,” according to its promotional material.
Finally, between March 2014 and March 2017, Chandhoke and Shea allegedly participated in undisclosed PSTs totaling over $1 million. Some of these PSTs were related to a series of investment funds that Chandhoke and Shea launched in 2011 and 2012 called the VII Peaks Co-Optivist Funds. This was a joint venture between VII Peaks Capital and a managing broker-dealer, KBR Capital Markets, LLC. Both participated in these PSTs in varying capacities including co-creating, managing, and marketing the offering, as well as signing subscription agreements. The remaining PSTs relate to AlesiaTec Series Seed and Series A PSTs.
The Offer of Settlement orders that Chandhoke and Shea serve a two-year suspension from associating with any FINRA member firm in any and all capacities and each pay a $50,000 fine.