A Financial Industry Regulatory Authority (FINRA) arbitration panel based
in Cleveland, Ohio, unanimously ordered brokerage firm Primesolutions
Securities, Inc. and its owner and President, Victor L. Bull, to pay damages
and costs of more than $100,000 to two clients represented by the investment
fraud law firm of Meyer Wilson. The FINRA arbitrators also assessed the
majority of the cost of the hearing against Cleveland-based brokerage
firm Primesolutions and Mr. Bull.
Investors, husband and wife, lost $92,500 in a company called KGTA Petroleum
(KGTA). Primesolutions’ broker, Jerry Cicolani, recommended and
sold KGTA to several Primesolutions customers, including these investors,
without the approval or knowledge of Primesolutions. The company was marketed
to investors as a petroleum company that earned profits by buying and
reselling various crude oils and refined fuel products. According to the
Securities and Exchange Commission, KGTA did not generate any revenue
through the purchase and resale of oil products. Instead, KGTA used funds
from new investors to pay fake returns to old investors. Mr. Cicolani
pled guilty to criminal charges relating to these offenses and is currently
At the evidentiary hearing, the brokerage firm argued that it had in place
a supervisory system that was reasonable and notwithstanding that, Mr.
Cicolani evaded its system and the Ponzi scheme was not detected. However,
the arbitration panel’s decision supports the investors’ position
that Primesolutions and Mr. Bull had a duty under industry rules to implement
a supervisory system that is designed to
prevent the type of misconduct that took place here.
According to attorney
Chad M. Kohler, who served as one of the Meyer Wilson attorneys for the investors at
the hearing, “through the testimony of our expert, we established
that the standard of care in the industry is that firms must follow up
and do reasonable investigation of all red flags. It is not enough to
accept as true the unverified representations of a broker, which is what
happened in this case.”
Meyer Wilson attorney
Courtney M. Werning, who also represented the investors at the hearing, explained that the
panel also held Mr. Bull jointly and severally liable for these failures.
“This is an important win for investors in Ohio and across the country,”
explained Werning, “because it sends a clear message to officers
and directors of brokerage firms that they cannot escape personal liability
under the Ohio Securities Act for their firms’ failures.”
Under the Ohio Securities Act (OSA), the purchaser of a security in a transaction
that violates the OSA may have an action against “every person who
has participated in or aided the seller in any way.” The language
and application of the OSA is extremely broad in order to protect consumers.
Werning explained, “this award demonstrates that an officer or director’s
participation in negligent supervision of a broker is more than enough
to establish liability under this section of the OSA when it causes losses
to the investor.”
The case caption is
FINRA Case ID 14-01186 (Charles David Winter and Jennifer Winter vs. Primesolutions Securities,
Inc. and Victor Lawrence Bull).
For more information about this case or other investment loss-related issues please
contact one of the attorneys at Meyer Wilson Co., LPA. The law firm is a nationally recognized securities
firm representing individual and institutional investors who are victims
of investment advisor negligence, fraud, Ponzi schemes, and other investment-related
losses. For more information, please contact attorney
David P. Meyer at (888) 390-6491.