The allegations read: Bahl was named a respondent in a finra complaint alleging that he made fraudulent misrepresentations in connection with the solicitation and sale of over $3 million worth of promissory notes issued by a real estate development company in a private offering to 17 of his customers. The complaint alleges that bahl committed fraud by recklessly misrepresenting to customers that the notes were fully secured by the company's pledge of proceeds from the sale of certain historic rehabilitation tax credits (hrtcs). Bahl provided investors with documents in which the company falsely stated that the notes were secured by proceeds from the hrtcs. Bahl used these materials to market the notes to prospective investors, recklessly disregarding information indicating that company's statements were false. In reality, there was no collateral for the notes. Bahl willfully violated section 10(b) of the securities exchange act of 1934 and rule 10b-5. The complaint also alleges that bahl recklessly or (in the alternative) negligently made false and misleading representations about the notes and provided false and misleading material to investors about the notes. The misrepresentations were material. The complaint further alleges that bahl failed to understand the risks and benefits of the securities that he was recommending to his customers. Bahl did not satisfy his reasonable basis suitability obligations with respect to the notes. Bahl lacked a reasonable basis to recommend the notes to his customers in light of his lack of understanding of and investigation into the hrtcs and whether they were available to secure the notes, and the multiple "red flags" surrounding the offering which bahl did not take the time to understand or investigate.
