Are things so bad for Advanced Equities that they now can’t pay their brokers? An Advanced Equities broker filed a FINRA arbitration claim against the firm and its founders, claiming they failed to pay certain commissions for raising capital for transactions the firm funded. And last week, he won.
The arbitration panel ordered Advanced Equities, Chairman Keith Daubenspeck and CEO Dwight Badger to pay John Galinsky $4.5 million in compensatory damages. He claimed AEI, Daubenspeck and Badger failed to pay certain commissions on Bloom Energy, Arbinet, Alien Technology, Infinera, ForceIO Networks, Peregrine Semiconductor, and Motricity. The panel found that “respondents exhibited a reckless disregard for the warrant rights of the broker and breached their fiduciary duties to the broker.”
Galinsky also claimed fraudulent inducement; unjust enrichment; retaliatory discharge; breach of contract; and tortious interference with contract.
Advanced Equities has its roots in venture capital and private equity deals, which it sold through its retail broker arm and its former independent broker/dealer, First Allied Securities. First Allied spun off from Advanced Equities in August 2011 to focus on its core business—helping its 1,000 advisors grow their practices. It also wanted to distance itself from the private equity focus, sources said.
Galinsky worked for Advanced Equities’ retail broker unit from 1999 to 2009, not for First Allied. He’s now with National Securities Corporation, FINRA filings show.
But this is not the first time Advanced Equities has been in hot water over its private offerings. In January, the SEC slammed Daubenspeck and Badger with Wells notices, notifying that they may take enforcement action related to a private offering in 2009. It’s still not clear what that private offering could’ve been. Some speculate Fisker Automotive, a manufacturer of hybrid electric cars, could be the culprit. Fisker has been getting a lot of bad press lately due to a garage fire involving the manufacturer’s Karma model. Fisker has blamed the customer for the incident. And now Sens.Charles Grassley of Iowa and John Thune of South Dakota may ask the Department of Energy about the reputation of Advanced Equities, Fisker’s backer.
Either way, it doesn’t bode well for Advanced Equities.