The allegations read: Rafaloff was named a respondent in a finra complaint alleging that he engaged in a scheme to defraud over $400,000 from a sole client, an elderly investor whom he had befriended. Rafaloff convinced the elderly investor into investing $405,000 of her retirement earnings into speculative business entities (collectively, the companies) for whom rafaloff claimed that he performed consulting services. The complaint alleges that rafaloff willfully violated section 10(b) of the exchange act and rule 10b-5 thereunder, by making misleading statements and omitting material facts in connection with his recommendation that the customer invest $405,000 in speculative companies he controlled. The complaint also alleges that rafaloff provided the customer with written guarantees against losses, in which he agreed to personally make payments to her under the terms of the investment contracts in the event that any of the companies defaulted. The complaint further alleges that rafaloff withdrew the customer's investment principal and converted them for his personal use, without the customer's permission or authorization. In addition, the complaint alleges that rafaloff never informed his member firm that he was engaging in private securities transactions with the customer, nor did he ever seek approval from the firm to participate in any outside business activities with the companies. Instead, rafaloff falsely represented in the firm's compliance questionnaires that he was not engaging in such activities. Thereby, rafaloff made false and inaccurate representations to his firm. Moreover, the complaint alleges that rafaloff recommended to the customer were unsuitable because he lacked an adequate and reasonable basis for recommending these investments to her. Moreover, the investments were unsuitable based on the customer's stated investment profile. Furthermore, the complaint alleges that rafaloff provided false and misleading information to finra during an on-the-record interview (otr) concerning, among other things, his handling of the customer's investment in the companies.
