FINRA’s Department of Enforcement began an investigation and initiated Disciplinary Proceeding (No. 2013035130101) stemming from Cantone Research’s sale of certificates of participation in promissory notes. Under the terms of the notes, the investors’ funds would be used by Christopher L. Brogdon, an individual who worked in the assisted living and nursing home industry, to purchase and/or redevelop a nursing home and assisted living facility controlled by Brogdon. According to FINRA, Cantone Research, through Anthony Cantone, sold over $8 million worth of the promissory notes from 2010 to 2013. To date, four of the five promissory notes have defaulted, resulting in approximately $6 million in losses for aggrieved investors.
FINRA’s allegations focus on Cantone Research’s material misrepresentations and omissions to investors in connection with the sale of the promissory notes. Specifically, FINRA alleged Cantone Research and its president (Anthony Cantone) failed to disclose that 1) Brogdon had twice been barred from the securities industry, once for misconduct involving unauthorized transactions, and a separate “scheme” involving financial misconduct; 2) Brogdon had been indicted for racketeering, theft, and Medicaid fraud; 3) Brogdon had been found liable for breaching a stock repurchase guarantee agreement; and 4) several entities controlled by Brogdon had filed for bankruptcy.
Moreover, FINRA alleges that Brogdon breached the terms of earlier promissory notes when he failed to make required principal or interest payments to investors, which was subsequently covered by Cantone Research. Yet, Cantone Research failed to disclose its involvement in covering portions of the earlier principal or interest payments to later investors of the promissory notes. FINRA alleges this was material information that was required to be disclosed to investors.
Based upon the foregoing alleged misconduct, FINRA asserted Cantone Research violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Exchange Act Rule 10b-5 thereunder, and FINRA Rules 2010 and 2020. With respect to FINRA’s allegations centering on Cantone Financial’s misuse of customer funds, FINRA brought claims for violation of FINRA Rules 2150 and 2010. Finally, FINRA alleges the firm and Anthony Cantone’s recommendations were unsuitable and improperly supervised in violation of FINRA Rules 2010 and 2111(a), as well as NASD Conduct Rule 3010.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment losses investing in certificates of participation in promissory notes through Cantone Research, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please complete the contact form or contact one of our attorneys at (800) 627-2179 to schedule a free consultation.