FINRA Files Complaint Against Broker Gustave Schmidt Over Undisclosed Fees and Private Placement Recommendations
The Financial Industry Regulatory Authority (FINRA) has filed a disciplinary complaint against Gustave J. Schmidt (CRD #2709698), alleging that the longtime broker failed to disclose significant compensation tied to private placement products he recommended to retail clients and lacked a reasonable basis to recommend those investments.
Schmidt, who has been registered with FINRA since 1996 and has been associated with Investment Network Inc. (INI) since 2017, allegedly recommended a series of StraightPath Venture Partners pre-IPO private placement offerings between December 2020 and April 2021. According to the complaint, ten customers invested a total of $437,100 based on Schmidt’s recommendations. The investments involved were allegedly SP Ventures 8 and SP Ventures 9.
Allegations Against Gustave Schmidt
Undisclosed Compensation and Conflicts of Interest
FINRA alleges that Schmidt knowingly recommended private placement offerings while failing to disclose all compensation that he and his firm would receive.
Although offering documents stated that INI would earn “up to 10%” in placement fees, FINRA contends that Schmidt knew StraightPath had promised:
-
An additional 5% undisclosed fee paid to INI for each investment by an INI client, and
-
50% of any carried interest earned by StraightPath on profitable investments.
Schmidt allegedly received $59,664.15 in total concessions—$19,888.05 of which came from the undisclosed additional 5% fee. INI separately received more than $32,000 in undisclosed carried interest payments.
FINRA asserts that Schmidt violated FINRA Rule 2010 as well as anti-fraud provisions under Section 17(a)(2) and (3)of the Securities Act by disseminating offering documents that omitted material facts and by engaging in conduct that deceived investors.
Regulation Best Interest (Reg BI) Disclosure Violations
FINRA also alleges that Schmidt willfully violated Reg BI’s Disclosure Obligation by failing to fully and fairly disclose in writing:
-
The additional 5% fee
-
The shared carried interest arrangement
-
The financial conflicts these payments created
Failure to Understand the Investments
FINRA’s complaint further claims that Schmidt failed to exercise reasonable diligence to understand the StraightPath offerings before recommending them, violating Reg BI’s Care Obligation. According to FINRA, Schmidt allegedly did not:
-
Understand how StraightPath acquired pre-IPO shares
-
Understand the structure or costs of the offerings
-
Investigate whether markups were charged
-
Identify who operated or controlled StraightPath
Despite this, he continued to recommend the investments to retail clients.
Notably, StraightPath and its principals have since been the subject of SEC enforcement actions, and in November 2025, StraightPath principals were convicted of securities fraud and other offenses related to their operations.
SEC Charges Against StraightPath Venture Partners
In May 2022, the Securities and Exchange Commission filed an emergency enforcement action against StraightPath Venture Partners LLC, StraightPath Management LLC, and several of their principals, alleging a large-scale pre-IPO fraud scheme. According to the SEC’s complaint, StraightPath raised at least $410 million from more than 2,200 investors between 2017 and 2022 while selling pre-IPO shares they often did not own, commingling investor funds despite assurances that investments would remain segregated, and collecting substantial undisclosed markups and fees.
The agency alleges that StraightPath and its leadership paid themselves more than $75 million, paid sales agents nearly $48 million in undisclosed markups—sometimes as high as 100%—and left a share deficit of at least $14 million within the funds. The SEC also notes that two founders involved in overseeing the investments had previously been barred from the brokerage industry and that individuals associated with StraightPath deleted emails requested by investigators. The SEC obtained an asset freeze and other emergency relief and is seeking injunctive relief, disgorgement, and civil penalties as the case proceeds.
FINRA’s Requested Sanctions
FINRA is seeking:
-
Findings that Schmidt committed the alleged violations
-
Disgorgement and restitution of ill-gotten gains
-
Appropriate sanctions under FINRA Rule 8310
-
A finding that Schmidt willfully violated Reg BI
The case will proceed before FINRA’s Office of Hearing Officers.
Investors Concerned About Private Placement Losses?
If you invested with Gustave Schmidt, Investment Network Inc., or in StraightPath Venture Partners pre-IPO offerings, you may have recovery options through FINRA arbitration.
Brokerage firms are required to supervise recommendations and ensure investments are suitable and in the customer’s best interest.
The White Law Group has represented hundreds of investors in claims involving unsuitable investment recommendations, fraud, and improper supervision.
For a free consultation with a securities attorney, please call (888) 637-5510.
Frequently Asked Questions About Gustave Schmidt
1. Who is Gustave Schmidt and what is his role in the StraightPath offerings?
Gustave J. Schmidt (CRD #2709698) is a registered broker associated with Investment Network, Inc. (INI). Between December 2020 and April 2021, he recommended several private placement offerings managed by StraightPath Venture Partners to his clients. These were pre-IPO fund series that purportedly allowed investors to gain exposure to privately held pre-initial public offering companies.
2. What are the specific allegations against Schmidt in the FINRA complaint?
FINRA alleges that Schmidt failed to fully disclose compensation: he and INI received an additional 5% fee (above what was disclosed in the offering documents) and shared in the carried interest of the StraightPath funds, but these were omitted in investor-facing materials. Furthermore, Schmidt is accused of lacking a reasonable understanding of the risks, structure, and costs associated with the offerings, thereby failing to exercise due diligence and breaching his obligations under Regulation Best Interest (Reg BI) and FINRA Rule 2010.
3. What options do investors have if they purchased StraightPath offerings through Schmidt?
If you purchased StraightPath interests on Schmidt’s recommendation and believe you were misled or inadequately informed, you may have potential recovery options. These could include initiating a FINRA arbitration claim for misrepresentation, failure to disclose conflicts of interest, or lack of suitability. It’s important to consult with a securities attorney, who can review your subscription documents, communications, and Schmidt’s disclosures to assess whether a claim is warranted.
