Levin Papantonio Rafferty is investigating potential customer claims involving the broker Charles Bonilla, formerly employed by David Lerner Associates, Inc.
According to the Financial Industry Regulatory Authority (FINRA)’s Letter of Acceptance, Waiver, and Consent No. 2020067626001, Charles Bonilla has been suspended for five months, fined $5,000, and has been ordered to disgorge $22,417 in commissions. Bonilla’s suspension is a result of recommending energy-sector securities to his customers without having a reason to believe the investments were suitable.
Mr. Bonilla has over 20 years of experience in securities and has been employed by eight different firms. Most recently, Bonilla has been associated with the following:
- Pruco Securities, LLC from May 2018 – February 2019
- David Lerner Associates, Inc. from December 2015 – May 2018
- Scottrade, Inc. from January 2008 – December 2014
FINRA’S BrokerCheck website reports two disclosures, an employment separation from Scottrade after allegations in December 2014 following accusations of “engaging in a business activity without receiving proper approval prior to the business activity.”
Bonilla was also issued a regulatory sanction by FINRA in February 2021, which led to his suspension.
Allegations by FINRA in the regulatory sanction included that
- Bonilla did not conduct reasonable diligence on investments before recommending to customers.
- Bonilla was not able to describe much about the fund’s holdings, other than some of the holdings were “midstream” energy companies.
- Bonilla did not know how the fund paid monthly distributions. Additionally, Bonilla did not know what diligence David Lerner Associates, Inc. (Bonilla’s place of business during this time) performed on the fund or the holdings prior to recommending shares to clients.
- Without the proper understanding of the risks of the fund, Bonilla recommended three customers to invest over $250,000 into these energy-sector securities.
- During the period between when the funds were initially offered in July of 2014 and December 2015, the fund’s net asset value declined by over 40%.
- Bonilla received a commission of $4,355.72 from these investments.
According to FINRA, Bonilla also recommended illiquid investments in a “limited partnership” sold to customers of David Lerner Associates. FINRA described the limited partnership as follows:
Limited partner [investors] invested in the partnership by purchasing common unit ownership interests in the partnership. The limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnership was a “blind pool,” meaning [that] at the time of the initial offering, the partnership had not identified any properties for acquisition. According to the prospectus, the partnership’s primary objectives included making distributions to limited partners, which could be sourced from operations, offering proceeds, borrowings, and/or return of capital. Additionally, five to seven years after the termination of the offering, the partnership intended to engage in a liquidity transaction in which the partnership would sell its properties and distribute the net sales proceeds to the partners, merge with another entity or list its common units on a national securities exchange. The partnership’s ability to make [a] return of capital distributions to limited partners and engage in a profitable liquidity event was substantially dependent on the performance of the properties in which the partnership invested.
Following Bonilla’s actions, FINRA alleged:
- Bonilla did not perform reasonable diligence on the partnership prior to recommending to customers.
- Bonilla did not read the full prospectus, and he did not review the partnership’s financial statements.
- Bonilla did not know how the partnership generated funds to pay out to investors monthly.
- Bonilla did not know how the price of common units that showed on customer account statements were calculated.
- Without sufficient understanding of the fundamental risks and features of this partnership, Bonilla recommended two of his customers invest a combined $650,000 into this partnership.
- At the time, one of the customers was a 28 year old and starting her own business.
- In March 2020, the partnership notified its unit holders that it was suspending distribution until further notice.
- Bonilla received $18,061.31 in commission from transactions.
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