The Financial Industry and Regulatory Authority (FINRA) has fined registered principal John Brady Guyette of former FINRA member firm Community Bankers Securities, LLC, $86,140 and suspended him one year (effective July 2, 2012 through July 1, 2013) for misconduct in failing to complete due diligence in familiarizing himself with various investment options he recommended to clients and customers, instead relying on second-hand knowledge, opinions and interpretations from co-workers and other firm personnel.
Community Bankers Securities president and CEO Nicholas D. Skaltsounis was also sanctioned by FINRA, receiving a 30-day suspension and $10,000 fine for allowing securities sales without the disclosure of material facts.
Between 2003 and until December 23, 2009, Guyette, a senior vice president of firm Community Bankers Securities, executed his misconduct primarily by advising customers to invest in a special purpose subsidiary of Medical Capital Holdings, Inc, whose offices held headquarters in Anaheim, California.
FINRA determined that because Guyette neglected to research Medical Capital Holdings, he underestimated the risk customers incurred by investing in the private placement—because Guyette did not read the offering's private placement memorandum, he overestimated the bank trustee's limited role and was unaware that Medical Capital Holdings was accordingly not subject to trustee oversight; Guyette specifically overestimated the level of supervision and protection afforded by the trustee, meaning that Guyette falsely believed the trustee monitored principal and interest calculations, collateral coverage ratios and whether or not Medical Capital defaulted or breached its obligations.
When the Medical Capital Holdings specialty corporation defaulted in 2008, it became clear that Guyette's characterization of MedCap as a "very safe investment" was inaccurate.
If you have had any dealing with John Brady Guyette, Nicholas D. Skaltsounis, their firm Community Bankers Securities or Medical Capital Holdings, Inc., and suspect that an omission of material facts or a gross mischaracterization of investment options has adversely affected you or your interests, please call The Law Offices of Jonathan W. Evans & Associates at (800)699-1881 for an investigation and consultation.