Published On: June 21, 2016

According to a recent InvestmentNews article, Anthony Diaz, a Pennsylvania broker, is under federal indictment for fraudulent sales of illiquid alternative investments. The U.S. Attorney for the Middle District of Pennsylvania filed criminal charges against him for allegedly lying about the suitability of alternative investments to his clients. These unsuitable investments included nontraded real estate investment trusts (REITs). Diaz was barred from the industry last year by the Financial Industry Regulatory Authority (FINRA) and is currently facing six federal charges of wire fraud. During his career, Mr. Diaz was terminated, or permitted to resign from six of the 11 financial investment firms at which he worked over 15 years. According to the article, FINRA claimed Diaz “induced approximately 80 customers to enter into variable annuity exchanges, often subject to significant surrender charges, without a reasonable basis for recommending those exchanges.” He also “falsely told” seven clients that investments in REITs were “guaranteed or guaranteed to pay certain amounts of interest.” In reality, REITs are highly unsuitable and illiquid investments that are not suitable for most clients, and only garner large commissions for the brokers who sell them.

Mr. Diaz went on to provide false information on the REIT documents concerning his clients’ net worth, income, risk tolerance and/or investment experience in order to make it appear that these clients met the net worth and/or income requirements to invest in these products. He subsequently signed disclosure forms for them. This will lead to the government trying to prove that he had a deliberate intent to defraud. He will be on trial in federal court next month.

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