Three Cedar Brook Financial Brokers Suspended for Misleading Investors
Over Private Placements
Two founders of Ohio-based Cedar Brook Financial Partners and its CEO have
had their securities licenses suspended for allegedly making false statements
about two high-riskprivate placement securities.
According to FINRA, founders Michael Perlmuter and Howard Slater, and CEO
Azim Nakhooda, misled clients about investments in IMH Fund and Medical
Capital Holdings, Inc., two private placement securities that have been
the focus of numerous lawsuits and investigations over the past several years.
The IMH Fund invested in short-term commercial mortgage loans. Investors’
funds were used to make loans to owners and real estate developers whose
financing needs could not be met by traditional lenders. The fund’s
private placement documents specified that the investments carried a significant
risk of default, that investors’ rights to redeem the investments
units were significantly limited, and that the investments lacked both
liquidity and marketability.
Despite these facts, Slater and Nakhooda allegedly told potential investors
that the fund was a safe, consistent security that never failed to return
principal. Perlmuter, Slater, and Nakhooda also allegedly said the investments
were entirely liquid after 60 days. According to FINRA, these statements
directly contradicted the information specified in the fund’s private
Perlmuter, Slater, and Nakhooda also allegedly made
misrepresentations about investments inMedical Capital Holdings, Inc. In its private placement memorandum, the company warned:
“INVESTMENT IN OUR NOTES INVOLVES SIGNIFICANT RISK. THE NOTES ARE
SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL RESOURCES AND
HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. NO ONE SHOULD INVEST IN
OUR SECURED NOTES WHO IS NOT PREPARED TO LOSE YOUR ENTIRE INVESTMENT.”
Despite this warning, Perlmuter and Nakhooda allegedly told potential investors
that the notes offered principal protection. Perlmuter and Slater also
allegedly altered customer accounts to reflect false net worth information.
All three brokers were suspended for a period of months and ordered to
pay fines of between $30,000 and $50,000 each. Though they neither admitted
nor denied FINRA’s allegations, all three consented to the entry
of the findings.