Blau & Malmfeldt is investigating David F. Mickelson, a former registered representative of the Oceanside, California brokerage firm NFP Securities, Inc., in connection with his sale of securities in Micro Pipe Fund I, LLC, a private investment company. It is possible that defrauded investors may be able to recover portions of their losses by pursuing claims against Mickelson and NFP in arbitration.
In April 2013, the Financial Industry Regulatory Authority (FINRA) filed a complaint against Mickelson, who was registered with NFP from 2004 to 2011. FINRA’s complaint alleges wrongdoing on Mickelson’s part in connection with his promotion of Micro Pipe Fund.
Specifically, FINRA alleges that Mickelson “established, promoted, and managed” Micro Pipe Fund and raised more than $8.3 million from 71 investors and collected $944,000 in his capacity as manager of Micro Pipe Fund without disclosing this activity to NFP. This practice, known as “selling away,” is a violation of FINRA’s rules, which require that brokers reveal any outside investments to their firm.
FINRA rules also require broker-dealer firms to maintain supervisory systems reasonably calculated to detect violations of FINRA rules on the part of their registered representatives. It appears that NFP may have failed to adequately supervise Mickelson and that NFP may have either ignored, or failed to identify as a result of a lack of reasonable diligence, numerous obvious red flags.
Mickelson also participated in six other private securities transactions that were outside the scope of his firm, signing private placement agreements and checks for these investments. He was the manager and part-owner of Hannahlu Ventures, LP, signing private placement agreements and checks for investments with the Nutmeg Fund/Michael Fund, LLLP; the Nutmeg/Fortuna Fund; LP; the Nutmeg/Patriot Fund, LLLP; and his own Micro Pipe Fund. He also made investments in Lone Wolf, Inc. through DFM Agency, LLC, which was owned entirely by Hannahlu Ventures.
The complaint, which is pending, claims that while acting in his capacity as the managing member of his investment fund entity, Mickelson provided his investors with monthly balance sheets and investor account statements that were “false and misleading.”
For example, the Micro Pipe Fund included in its October, November and December 2007 monthly balance sheets and investor account statements a $90,000 investment that had not been received. Micro Pipe Fund also falsely valued shares in a company called Yinlips Technology, Inc., at $245,454.30, when in actuality the shares had no market value.
Mickelson circulated a brochure about the Micro Pipe Fund to potential investors that contained incomplete, misleading and oversimplified statements. Mickelson used four unapproved email accounts to send and receive securities-related email messages.
FINRA’s complaint also alleges that Mickelson and members of his immediate family owned or controlled 15 brokerage accounts at other broker-dealers, including SMH Capital and Aegis Capital. Mickelson did not disclose his relationship with NFP to the other broker-dealers, and did not inform NFP about the accounts in his annual certifications. FINRA has demanded that Mickelson be ordered to disgorge any and all “ill-gotten gains” with interest.
Mickelson’s victims who were sold interests in the Micro Pipe Fund, the Nutmeg Fund/Michael Fund, the Nutmeg/Fortuna Fund, and the Nutmeg/Patriot Fund may be able to recover a portion of their investment losses by pursuing claims in arbitration against Mickelson and NFP.
Please contact Blau & Malmfeldt at 312-443-160, or email Paul Malmfeldt at firstname.lastname@example.org for a no obligation consultation. Blau & Malmfeldt is a law firm that represents investors throughout the United States in securities, commodity futures, partnership and shareholder rights disputes.