On February 9th, 2017, the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers expelled Red River Securities, LLC from the industry and permanently barred its CEO Brian Keith Hardwick from association with any FINRA member firm.
Additionally, the FINRA panel ordered the Plano, Texas-based company to pay $24.6 million in restitution to affected customers. Red River Securities and Mr. Hardwick have 45 days to file an appeal from the date of the decision.
The Details of the Case Against Red River Securities
The complaint, which was filed by FINRA’s Department of Enforcement, details the allegations against Red River and Mr. Hardwick. According to the documents, the company sold interests in five separate oil and gas ventures to retail investors.
In the course making these sales, the Hearing Panel found that Red River omitted material facts, fraudulently misrepresented important details and failed to act in accordance with industry standards and regulations. More specifically, the Hearing Panel determined that Red River Securities and Mr. Hardwick were guilty of the following four things:
- Misrepresentation of earnings: The company had engaged in similar oil and gas ventures in the past. This fact was used in the effort to help solicit investment. While the company did tell investors that past performance was not a guarantee of future results, it fundamentally misrepresented its past performance. Indeed, investors were led to believe that prior projects had led to investors receiving income distributions that were far in excess of what actually happened.
- Misrepresentation of risk: Oil and gas developments, as with other natural resource projects, are inherently risky ventures. However, these particular projects had even more risk than investor were told. This is because the projects in question involved a ‘wildcat’ well. In simplified terms, ‘wildcat drilling’ is drilling in a location where no oil or gas has ever actually been discovered before. While this can sometimes pay off greatly, it is also far more risky and investors have a right to know that detail. Red River failed to disclose this fact.
- Failure to disclose conflicts of interest: The company, and associated individuals, had significant conflicts of interest. At no point were proper disclosures regarding these conflicts ever made to actual and prospective investors.
- Failure to ensure suitability: Finally, the Hearing Panel noted that two of the investors should have never been allowed to invest in the first place. Securities firms have a legal duty to refrain from pushing unsuitable investments on retail investors. Making a very large investment in a speculative oil and gas venture is not appropriate for most investors. However, Red River Securities actively encouraged two investors of moderate income to a put large percentage of their assets into these speculative projects.
Contact Our Office Today
At the Sonn Law Group, our experienced investment fraud lawyers advocate for wronged investors throughout the United States, Mexico and South America. If you have lost money investing with Red River Securities, or with any other brokerage firm handling oil and gas securities, please call our office today at 1-877-969-2412 to set up your free legal consultation.