If you were an investor of Gerald Dewes, call 1-866-817-0201 to discuss your legal rights as to loss recovery. All initial consultations are with an attorney and are free and confidential.
Gerald Dewes’ employer, Cadaret,Grant & Co., terminated his employment in November 2019. Termination was for selling investors shares of his own company, Elite Roasters. In March 2020, FINRA, the Financial Industry Regulatory Authority, expelled Dewes from the securities industry. Dewes had failed to cooperate with FINRA’s investigation of him and he failed to refute the charges against him.
The issue with selling Elite Roasters is that the investment was not approved by those supervising Dewes, his employing brokerage firm. Approval is needed so that the requisite due diligence investigation can be given the investment to assure that representations are correct concerning the investments’ assets, financing and other important factors. Brokers commonly sell unapproved investments so that the investment appears to have the backing of the brokerage firm but either is not a legitimate investment or would not withstand the scrutiny of a due diligence investigation by the brokerage. Such action is termed “selling away” and is a form of fraud.
Many Ponzi schemes start as simple selling away violations. A broker either wishes to promote the broker’s own business or is paid a heightened commission to sell investments in a friend’s business. These businesses do not have the due diligence review to assure that representations are accurate or that the venture is even solvent. When the business cannot meet expectations payments are made if the funds of new investors.
As a result, FINRA instituted a number of rules, including Rule 3270. This rule requires a broker to notify his employer of all outside business activity. The employer, in turn, is required to audit the broker and verify that all outside business activity is disclosed. The employer has a duty to supervise all investment sales even if the sales are of unapproved investments and outside the broker’s employment.
The employers of Dewes had other reasons to give heightened supervision. Dewes has had a variety of investor suits of which he has been the subject, and he has also been the subject of multiple tax liens. These past incidents of improper financial dealings should have served as a red flag.
We have handled a large number of selling away cases nationwide. Please call for an evaluation.