Former Purshe Kaplan Compliance Officer Blows Whistle on Broker-Dealer’s Review of GPB Holdings II

In a complaint filed May 1, 2018 in the United States District Court for the Eastern District of Pennsylvania, Toni Caiazzo Neff, a former compliance officer with Purshe Kaplan Sterling (PKS), alleges that she was wrongfully terminated after failing to approve GPB Holdings II as a suitable investment product for accredited investors.

When Neff raised concerns about the suitability of one of Purshe Kaplan’s alternative investments (also known as private placements), GPB Holdings II, she was informed she would no longer be working in compliance and was instead moved to the audit department. There, she began doing tasks that had previously been assigned to eight to ten different individuals. The complaint asserts that this action was an attempt by Purshe Kaplan to force Neff to resign.

On or around January 28. 2018, Neff contacted the FINRA Senior Regional Counsel in the Department of Enforcement, Woodbridge Office to inform him of her numerous concerns, including how PKS was allegedly trying to interfere with her audit investigation. She also raised a concern about “a pattern of quid pro quo with regard to new product approvals,” as well as “failure to supervise.” The complaint alleges that on January 31, she was terminated in retaliation for raising these concerns.

Following a 2016 FINRA inquiry related to real estate investment trusts (REITs), according to this complaint, sponsors began terminating their agreements with Purshe Kaplan. As a result, instead of putting their clients’ interests ahead of their own, PKS allegedly became “desperate” for new products:

By means of example, in or around July and August of 2017, alternative product sponsors began terminating active selling agreements with Defendant PKS, presumably due to the recent FINRA investigation, resulting settlement, and legal maneuvering undertaken by PKS thereafter. Because of the large settlement amount paid out and subsequent legal maneuvering of Defendant PKS, increasing numbers of sponsors terminated their active selling agreements with Defendant PKS, and Defendant PKS was desperate to have products on its platform for registered representatives to sell.

The FBI recently raided GPB’s New York offices, and the SEC and FINRA are now investigating GPB as an alleged Ponzi scheme. Private placements can be fraught with risk because they are more loosely regulated by the SEC as compared with stocks and bonds. Those who invest in private placements are generally considered to be more “sophisticated” investors who are expected to do their own due diligence and are thus granted fewer protections. Meanwhile, brokers receive large commissions, ranging from 8-12%. If you have invested in or are considering investing in private placements, you could be at risk for not only investment losses, but also fraud.

If you are a current or former investor in GPB Holdings—whether your broker was Purshe Kaplan or another one of the 63 broker-dealers that sold the investment —and feel you were misled, please don’t hesitate to contact Marc Fitapelli or Jonathan Kurta who are waiting to hear your claim. Call (212) 658-1500 or