Securities Arbitration Lawyer Blog
FINRA has suspended former stockbroker Michael August Pellegrino from the securities industry for two months. On January 26, 2021, Mr. Pellegrino and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) over allegations that Mr. Pellegrino distributed a retail communication to approximately 80 retail investors, promoting an investment in a “short-term, high yield contract” issued by a Florida LLC. The communication contained improper projections of future performance, misleading statements, and omitted material information, in violation of FINRA Rules. At the time, Mr. Pellegrino was registered with FINRA-member Taylor Capital Management Inc. (“TCM”).
In addition to imposing a two-month suspension, FINRA also fined Mr. Pellegrino $10,000.
If you have lost money with former stockbroker Michael August Pellegrino or TCM, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Letter of Acceptance, Waiver, and Consent No. 2017055120903
The AWC describes the following factual findings:
In July 2017, Mr. Pellegrino distributed a retail communication titled “Short Term High Yield Contract” to around 80 retail investors, about 50 of whom were Mr. Pellegrino’s customers at TCM. The communication promoted a financial instrument and referenced the broker-dealer TCM, and that TCM was a member of FINRA. The communication made projections of “6–10%” investment returns and used terms such as “predictable,” “consistent,” and “high yield contract” when describing the investment, which was misleading.
The communication stated that the investment would be “Backed by Collateral . . . Asset-Backed Like Cash, CDs, Oil and Real Estate” and would involve “No Stock Market or Interest Rate Risk.”
To invest, retail investors signed a “Memorandum of Indebtedness” (MOI), agreeing to provide funds for distribution at the issuer’s discretion. Additionally, the investors signed a Statement of Understanding relating to the MOIs that referenced TCM.
As the issuer, the Florida LLC pooled investor monies and distributed the funds to small businesses that were generally unable to borrow money through traditional means. These distributions are known as a “Merchant Cash Advance” (MCA). The communication failed to include any statements that investing in cash advances could result in complete principal loss, that MOIs were illiquid, automatically renewed, had fees, and that the investment relied upon revenues from small businesses that often use MCAs as a funding option of last resort.
The retail investors entered into the MOIs with the expectation of investment returns based on a percentage of the merchants’ future revenues. Nearly 50 of the investors who received the communication from Mr. Pellegrino executed MOIs with the issuer.
Financial Advisor Michael August Pellegrino
Pellegrino entered the securities industry in 2011. During his career, he has been registered with the following firms:
- Taylor Capital Management Inc., Oakbrook Terrace, IL (October 2012 – April 2018); and
- Center Street Securities, Inc., Oakbrook Terrace, IL (October 2011 – October 2012).
TCM filed a Uniform Termination Notice for Securities Industry Registration (Form U5) for Mr. Pellegrino on April 17, 2018. Although Mr. Pellegrino is not currently registered with a FINRA member broker-dealer, FINRA retains jurisdiction over him.
On August 21, 2019, TCM filed an Amended Form U5 for Mr. Pellegrino, disclosing that he may have engaged in conduct actionable under FINRA’s rules. This recommenced the running of the two-year period of retained jurisdiction.
TCM’s FINRA membership was canceled in October 2019.
Mr. Pellegrino has been the subject of eleven customer complaints, one of which resulted in a $75,000 award for a Claimant. The customer complaints allege several types of violations, including unsuitable investment recommendations in REITs, fraud, and misrepresentation.
Duty to Supervise
Financial institutions, like TCM, must properly supervise financial advisors and customer accounts. Brokerage firms are required to establish and maintain a reasonably designed system to oversee account activity, such as private securities transactions, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.
If you have lost money with Michael August Pellegrino or TCM, contact New York securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.