Woodbridge Mortgage Fund Investors File FINRA Arbitration Claims Against Stockbrokers and Advisors

Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of their losses through securities litigation or FINRA arbitration. Since the news of Woodbridge’s bankruptcy and a lawsuit filed by the Securities and Exchange Commission broke in late 2017, facts have emerged suggesting that Woodbridge investors have likely lost a substantial portion of their principal.  Further, although so-called First Position Commercial Mortgages (“FPCMs”) and Woodbridge units are securities according to state and federal regulators, Woodbridge FPCMs were not registered as securities with government regulators as required by law, and in many instances were sold by unregistered, unlicensed persons.

In other instances, stockbrokers and financial advisors who were licensed and associated with Financial Industry Regulatory Authority (FINRA)-registered firms sold Woodbridge securities to investors, notwithstanding the fact that the Woodbridge securities were not registered.

FINRA arbitration claims have reportedly been filed against the following stockbrokers and investment advisors concerning alleged sales of Woodbridge securities:

Broker                             Firm                                         Location

Frank J. Capuano             Royal Alliance                           Holyoke, Massachusetts

Frank R. Dietrich              Quest Capital                            Springfield, Virginia

Peter D. Holler                  Securities Service Network    Bristol, Tennessee

Alan New                            Nylife Securities                       Fort Wayne, Indiana

Christopher Wendel         S.A. Stone Wealth Mgmt.       Celina, Ohio

A registered person who sells a security away from his or her firm without first obtaining written approval from the firm violates FINRA Rule 3270, and a registered person who engages in an outside business activity without prior notice to his or her firm, including the sale of non-securities products, violates FINRA Rule 3280.  Associated persons are required to report, in writing, any and all types of business that they plan to conduct away from their brokerage firms, whether or not it involves a security, and to obtain written approval from their firms before they sell any security, including securities in the form of promissory notes.

In such cases, brokerage firms have typically taken the position that Woodbridge securities were sold without their knowledge or authority in what is typically referred to as a “selling away” scenario.  However, denying knowledge of a broker’s activity (or the fact that the activity may be unauthorized) does not absolve a brokerage firm  from its obligation to supervise all activities of its associated persons.  Financial Industry Regulatory Authority rules including FINRA Rule 3110 have established that firms must properly supervise brokers’ activities while they are registered with the firm.  If they fail to do so, the brokerage firms can be held responsible for the activities of their representatives and, thus, could be ordered to compensate their clients for losses sustained for the period they were registered with the firm.

The following Woodbridge investments could give rise to an arbitration claim against a stockbroker or financial advisor (or their employer/brokerage firm) if the recommendation to purchase them lacked a reasonable basis, or if the investments were sold based on misrepresentations or omissions of material fact:

* WMF Management, LLC

* Woodbridge Group of Companies, LLC

* Woodbridge Mortgage Investment Fund 1, LLC

* Woodbridge Mortgage Investment Fund 2, LLC

* Woodbridge Mortgage Investment Fund 3, LLC

* Woodbridge Mortgage Investment Fund PA, LLC

* Woodbridge Group of Companies, LLC (DBA Woodbridge Wealth)

Investors in any Woodbridge fund who have suffered losses and purchased Woodbridge securities may be able to recover their losses in FINRA arbitration.  Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.