Broker Investigation: Mike Patatian, Western International Securities
The Financial Industry Regulatory Authority has reportedly filed a complaint against financial advisor Mike Patatian of Westlake Village, CA, claiming he recommended unsuitable investments to clients, in some cases inflating client assets to make them eligible and in one case allegedly impersonating a client, according to FA-mag.com on March 3.
According to FINRA’s complaint, Megurditch Patatian (Mike Patatian) purportedly recommended 81 non-traded real estate investment trusts (REIT) worth $7.8 million to 59 clients from 2013 to 2017, despite not having “a reasonable basis to recommend the product to any investor” and apparently didn’t understand its basic features or conduct reasonable due diligence on the purchases.
FINRA notes that many of these clients were retirees whose risk profiles were not suited to non-traded REITs.
Non-traded REITs are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Further, FINRA said that Patatian had the customers surrender variable annuities, in order to fund some of the purchases, which reportedly triggered taxes and fees and he also purportedly recommended unsuitable variable annuity exchanges.
The regulator further alleged that Patatian “impersonated a customer—without the customer’s consent or knowledge—in a telephone call with an insurance company to obtain the contract value and surrender fee for the variable annuity.”
According to the complaint, Patatian was paid $458,418.07 in commissions from the sale of the 81 non-traded REITs, and that this represented about 80% of his earned commissions from April 2013 to March 2017. These sales were 96% of his 2013 commissions and 95% of his 2014 commissions, according to FINRA.
According to FINRA, the state of California (where all 59 of his customers were reportedly from)and the REIT issuers limited the amount that a customer could invest in any non-traded REIT to 10% of the customer’s net worth.
FINRA alleged, “To avoid the 10% limit, Patatian inflated customers’ net worth on the client disclosure form in 26 instances. In doing so, Patatian was able to sell non-traded REITs in amounts over 10% of the customers’ net worth to 18 customers.”
FINRA says that these investments were not suitable for investors with short-term liquidity needs and the prospectuses for these investments said specifically that they were only for those seeking long-term investments given their illiquid nature.
FINRA’s Department of Enforcement is recommending that Patatian be required to disgorge ill-gotten gains and make complete restitution with interest.
According to his broker profile, Patatian was registered with Western International Securities in Westlake Village, CA from 2013 until April 2020 when he was dismissed after the firm “questioned the integrity of a client-signed document.” Patatian has a lengthy list of disclosure events on his broker profile including three employment separations and nine customer complaints. According to his profile, Patatian denies all claims against him in connection with FINRA’s investigation.
Filing a Complaint against your Brokerage Firm
The White Law Group is investigating potential securities fraud claims involving Mike Patatian and the liability his former employer, Western International Securities, may have for failing to properly supervise him.
Brokerage firms are required to adequately supervise their advisors. They must ensure they are complying with FINRA rules.
When brokers abuse client accounts and conduct transactions that violate securities laws, the brokerage firm they are working with may be liable for investment losses. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
If you are concerned about investments with Mike Patatian and Western International Securities, the securities attorneys at The White Law Group may be able to help you. Please call 888-637-5510 for a free consultation, or visit us on the web at www.whitesecuritieslaw.com.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois.
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