The Green Firm Wins Minnesota Private Placement FINRA Arbitration Case

The Green Firm Reps Four Minnesota Investors against Emergent Financial Group

The Green Firm was hired by multiple Claimants residing in Minnesota to represent them at a FINRA Arbitration after their case could not be settled by their prior representatives. Claimants initially filed their claim against Emergent Financial Group, Inc. and their acting Financial Adviser for the improper recommendation of a private placement investment into a start-up company called DigiMedical Solutions, Inc., aka DigiMed.

After no offer was made to settle, Green Firm attorney Daniel Lipson tried the case in front of a three person arbitration panel. Following a grueling five-day hearing, Mr. Lipson was successful in securing awards for multiple Claimants.

For the official FINRA award, please click here.

Failure to Conduct Due Diligence and Unsuitable Investments in Private Placement

Mr. Lipson argued that the investment into the private placement DigiMedical was not suitable for his clients. His position was based on evidence that a) DigiMedical should never have been recommended to the Claimants in the first place since they were not accredited investors; and b) that the brokerage firm failed to fulfill its due diligence requirements prior to recommending the investment.

According to the SEC, an accredited investor must meet one of the following requirements:

  1. earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.

  2. have a net worth exceeding $1 million, either individually or jointly with his or her spouse.

  3. be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.

Agreeing with Mr. Lipson’s theory of the case, the Panel awarded every penny lost to one of the Claimants, and almost 70 cents on the dollar to another. The key testimony from Mr. Lipson’s victory came when cross examining Claimants’ former financial adviser and CEO of broker-dealer Emergent. During examination, Mr. Lipson was able to elicit culpable facts surrounding the sale of DigiMed, on top of uncovering Emergent’s lack of supervision and/or procedures set to prohibit the sale of products like DigiMed to unsophisticated and novice investors. Emergent countered that the sale of DigiMed was appropriate even in light of the fact that in one Claimant’s account opening documentation - updated months prior to the recommendation of the private placement - her net worth was clearly well below that required of an investor who seeks to purchase alternative investments such as DigiMed. Even more egregious was what appeared to be the broker’s aggressive profit-seeking tactics in securing the sale of the DigiMed private placement to an investor suffering from brain trauma.

According to the SEC, a private placement is a limited offering of a company’s securities that is not SEC-registered and not public. For more on this topic, please click here.

Experienced Securities Litigation Attorneys

Attorney Dan Lipson and the team of talented and experienced lawyers at the Green Firm have years of experience with complex securities litigation and the FINRA arbitration process.

If you or anyone you know has been the victim of broker misconduct or investment fraud, please contact us for a free consultation at 1-855-462-3330 or via email by clicking here.