A broker with a record of dozens of customer complaints dating back to 2011 has been barred from the securities industry by the Financial Industry Regulatory Authority on charges that he caused an elderly couple to lose $2.5 million in an unreported private investment deal.
David R. Geake, who has worked in the securities industry for 24 years, agreed to the disciplinary action under a letter of acceptance, waiver and consent filed by Finra Monday, the regulatory organization announced.
Finra said that Geake, while working for Ausdal Financial Partners of Northbrook, Ill., in November 2016, persuaded an elderly husband and wife—neither of whom were Ausdal clients—to pledge about $15 million of securities as collateral for a loan taken out by a startup company, named "Company A" in the regulator's complaint, of which Geake was a part owner.
"Geake assured the couple that their risk of investment loss was minimal," Finra said in the acceptance letter. "The couple received 200 shares of Company A’s common stock in exchange for their guarantee of the loan. By soliciting this pledge of securities and facilitating the transaction, Geake participated in a private securities transaction."
Before joining Ausdal, Geake had raised funds for the startup through the sale of common stock. He also personally invested $100,000 in the company and sat on its board of directors, Finra said.
In April 2018, Finra said, the unnamed startup company, which was involved in the online sale of auto parts, defaulted on the bank loan and closed its business, resulting in the couple being forced to repay the company's $2.5 million loan debt, plus interest.
Among the violations tied to the deal, Geake failed to provide written notice to Ausdal Financial prior to participating in the private security transaction, as was required by the company's policies, Finra said. He also "twice incorrectly attested to Ausdal Financial Partners on his annual compliance questionnaire that he had not participated in any private securities transactions," Finra said.
Geake's employment at Ausdal Financial ended in September 2018, according to Finra.
It was not the first time Geake had been involved in a dispute with clients.
Finra's BrokerCheck lists 26 incidents of customer complaints involving Geake, most of which are marked as either settled or still pending. The first recorded complaint was a case in March 2011 that resulted in a $140,000 settlement.
Geake has been registered with Finra since 1998, during which time he has worked at Franklin Financial Services of Houston (from 1998 to 2002), American General Securities of Skokie, Ill. (from 2002 to 2006), Madison Avenue Securities of Northbrook, Ill., Ausdal Financial Partners (from 2016 to 2018) and American Trust Investment Services of Chicago (from 2018 to May 30, 2023). He has also been registered with the SEC as an investment advisor since 1999.
"Between 2020 and 2022, Geake was a subject of seven customer arbitrations," Finra said. "The arbitration complaints alleged, among other things, various unsuitable investment recommendations and misrepresentations. The arbitrations resulted in settlements. Geake did not contribute to the settlements."
In May, the CFP Board of Standards permanently revoked Geake's right to use the CFP mark after he allegedly failed to cooperate with a board investigation of his activities.
When the revocation was announced, the board said it was investigating "Mr. Geake's resignation from a firm for engaging in an unreported private securities transaction and several customer arbitrations. The arbitrations included allegations of unsuitable alternative investments, failure to conduct due diligence on the alternative investments and breach of fiduciary duty."
Geake could not be reached for comment. Ausdal Financial representatives did not respond to a message requesting comment by press time.