FINRA fines White Plains broker for unsuitable advice

A White Plains financial executive has been sanctioned for providing investors with misleading information about a Canadian cannabis start-up company.

Mark D. Martino consented to a settlement with the Financial Industry Regulatory Authority. The regulatory agency disclosed the Aug. 10 settlement in its October disciplinary actions reports.

Martino agreed to disgorge $61,248 in fees he collected from True Pharmastrip Inc. (TPI), a Vancouver, British Columbia company that planned to develop cannabis-infused oral film strips. He was fined $10,000 and suspended from associating with FINRA member — effectively stopping him from doing business — from Sept. 19 to Oct. 17.

Martino was a minority owner and CEO of Ascendant Alternative Strategies, a White Plains brokerage firm that folded this past February.

In 2019, TPI hired Ascendant to serve as the private placement agent for debentures, a type of unsecured bond. Since the debentures have no collateral, investors must rely on the reputation and creditworthiness of the company that issues them.

But Martino failed to do proper due diligence, according to the FINRA report. Even before the debentures were offered for sale he knew, for instance, that the U.S. Federal Trade Commission had sued TPI founder Jason Cardiff for fraud in connection with a different company.

Martino had recognized the FTC case as a red flag, yet he continued to rely on Cardiff, who minimized the gravity of the FTC case, for information about the company. He did not require a written explanation, verify Cardiff’s story, or track the lawsuit.

As a result, FINRA says, Martino was unaware of new developments in the FTC case as he continued to recommend the investment.

After the selling period ended, the court in the FTC case ordered TPI to transfer $1.2 million to a receiver, leaving the company without a substantial portion of assets. When the debentures matured last year, TPI failed to repay investors.

Martino violated the “suitability rule,” where brokers are required to have a reasonable basis to believe, based on due diligence, that a recommendation is suitable for at least some investors. They must understand the potential risks and rewards, follow up on any red flags encountered along the way, look for adverse information about the issuer and “do more than simply rely upon representations by issuer’s management.”

FINRA also found that Martino had used his personal cell phone to send text messages to Cardiff and investors but failed to preserve the messages, as required, for three years.

Ascendant has been named as a defendant in several court actions. Last year, for example, New York Attorney General Lititia James accused Ascendant of securities fraud in Manhattan Supreme Court. The action also names as defendants Ascendant’s primary owners, David Gentile and Jeffrey Schneider, but does not name Martino.

Two months later, the U.S. Attorney’s Office in Brooklyn sued Gentile and Lash for securities fraud.

Both cases concern alleged illegal schemes by GPB Capital Holdings, a Manhattan investment adviser that raised $1.8 billion from investors.