The Financial Industry Regulatory Authority (“FINRA”) has initiated a disciplinary proceeding against FINRA member firm WR Rice Financial Services, Inc. (“WR Rice”) and its owner, Joel I. Wilson (“Wilson”). According to FINRA, between April 2011 and September 2012, Wilson and other WR Rice brokers, made fraudulent misrepresentations to around 100 investors in connection with the sale of over $4.5 million in limited partnerships.
The Complaint states that WR Rice brokers told investors that their funds would be invested in residential real estate contracts in Michigan and pay 9.9% interest. FINRA alleges that, in reality, investors’ funds were used by Wilson to make unsecured loans to The Diversified Group Partnership Management LLC and American Realty Funds Corporation, companies owned and/or controlled by Wilson. In addition, FINRA claims that Wilson extended the due date for repayment of the unsecured loans because DGPM and ARF did not have the funds to repay the loans when they initially became due. FINRA alleges that neither Wilson nor WR Rice disclosed the existence of the loans to investors.
According to the FINRA Complaint, Wilson and WR Rice violated federal securities laws, violated FINRA’s by-laws, falsified documents, intentionally failed to disclose to investors how their funds would be used, and converted investors’ funds. In addition to the Complaint alleging securities fraud, FINRA is seeking a temporary cease-and-desist order to prevent Wilson and WR Rice from further sales of the limited partnership interests at issue while the FINRA disciplinary proceeding is completed.