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FINRA Bars Illinois Broker for Not Disclosing Private Securities Transactions to B/D

David Geake solicited an elderly couple to pledge securities as collateral for a bank loan to support a startup the rep had invested in, but the couple allegedly lost their money when the company failed.

The Financial Industry Regulatory Authority has barred an Illinois-based rep after he allegedly solicited an elderly husband and wife to invest in a startup he was involved with, with the couple losing millions after the company floundered. 

David R. Geake first registered in 1998, and worked for a number of firms in the interim, though the actions detailed in the FINRA settlement occurred when he worked at Northbrook, Ill.–based Ausdal Financial Partners between 2016 and 2018.

Before joining Ausdal, Geake raised funds by selling common stock for an unnamed startup, which develops tech “to sell automotive parts online,” according to FINRA. The broker also invested $100,000 of his own money into the company and sat on its board of directors. 

Geake left Madison Avenue Securities (another Northbrook-based firm) in May 2015 and didn’t join Ausdal until late February of the following year, according to his BrokerCheck profile

But in November 2016, the rep solicited an elderly couple to pledge about $15 million of securities as collateral in guaranteeing a $2.5 million bank loan for the unnamed startup. Geake stressed the risk was “minimal” and helped the couple complete the transaction.

In return for guaranteeing the loan, the couple got 200 shares of the company’s stock. Neither the husband nor wife were Ausdal clients, but the transaction nevertheless was a private securities transaction. 

Geake was required to alert Ausdal about these transactions, but he allegedly failed to do so, even stating on annual compliance questionnaires that he hadn’t participated in private securities transactions.

Unfortunately, by April 2018 the unnamed startup closed down, having fully defaulted on the bank loan the elderly couple guaranteed; therefore the bank called for the loan to be repaid, leaving the couple holding on the hook for the $2.5 million loan plus interest, according to FINRA. 

An attorney for Geake did not return a request for comment before publication.

Geake left Ausdal in September 2018 to join American Trust Investment Services, based out of Chicago, and was affiliated there until May 30 of this year, according to BrokerCheck. Geake agreed to an industry bar to settle the charges, which he signed on June 23 and was accepted by FINRA on Monday.

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