Securities Arbitration Lawyer Blog
The Financial Industry Regulatory Authority (“FINRA”) has suspended financial advisor Charles Bonilla from the securities industry for five months, fined him $5,000, and ordered him to disgorge $22,417 in commissions.
FINRA suspended Mr. Bonilla for recommending energy-sector securities to customers without having a reasonable basis to believe those investments were suitable. Mr. Bonilla was a broker with David Lerner Associates, Inc. in Boca Raton, FL when the alleged conduct occurred.
If you have suffered financial losses investing with Mr. Bonilla or suspect that Mr. Bonilla did not have your best interest in mind when recommending investments, including energy-sector mutual funds or limited partnerships, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.
FINRA Letter of Acceptance, Waiver, and Consent No. 2020067626001
Charles Bonilla and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 8, 2021, over his conduct from December 2015 to December 2017, while employed by David Lerner Associates, Inc. (“David Lerner Associates”). FINRA alleged that Mr. Bonilla recommended that his customers invest in energy-sector securities without having a reasonable basis to believe those investments were suitable. FINRA concluded that Mr. Bonilla did not understand the potential risks and costs of the recommended investments because he failed to conduct reasonable diligence of the securities.
Mr. Bonilla Lacked a Reasonable Basis to Recommend a Proprietary Mutual Fund
According to FINRA, in December 2015 and December 2017, Mr. Bonilla recommended investments in a mutual fund created for customers of David Lerner Associates. During that period, the fund’s investment objective was to provide shareholders long-term capital appreciation and current income. According to the fund’s prospectus, the fund sought to achieve its investment objective by investing at least 80% of its net assets in a combination of securities and other assets of energy and energy-related companies. The fund sought to make monthly distributions to shareholders, which the prospectus states were expected to be a return of capital distributions. The fund’s holdings are concentrated in energy-related securities, and the fund’s performance is largely dependent on the condition of the energy industry.
FINRA specifically alleged:
- Bonilla did not perform reasonable diligence on the fund prior to recommending it to customers.
- Bonilla could describe little about the fund’s underlying holdings, beyond that some of the holdings were “midstream” energy companies.
- Bonilla did not know how the fund paid its monthly distributions. Further, Mr. Bonilla did not know what, if any, diligence David Lerner Associates performed on the fund or its holdings prior to offering shares of the funds to customers.
- Without sufficient understanding of these fundamental features or risks of the fund, Mr. Bonilla recommended that three of his customers collectively invest over $250,000 in the fund.
- Bonilla received $4,355.72 in commissions from these transactions.
- During the period between the fund’s initial offering in July 2014 and December 2015, the fund’s net asset value declined by more than 40%.
Mr. Bonilla Lacked a Reasonable Basis to Recommend a Limited Partnership
According to FINRA, between December 2015 and January 2017, Mr. Bonilla also recommended illiquid investments in a limited partnership sold to customers of David Lerner Associates. This is how FINRA described the limited partnership investment at issue:
Limited partner [investors] invested in the partnership by purchasing common unit ownership interests in the partnership. The limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnership was a “blind pool,” meaning [that] at the time of the initial offering, the partnership had not identified any properties for acquisition. According to the prospectus, the partnership’s primary objectives included making distributions to limited partners, which could be sourced from operations, offering proceeds, borrowings, and/or return of capital. Additionally, five to seven years after the termination of the offering, the partnership intended to engage in a liquidity transaction in which the partnership would sell its properties and distribute the net sales proceeds to the partners, merge with another entity or list its common units on a national securities exchange. The partnership’s ability to make [a] return of capital distributions to limited partners and engage in a profitable liquidity event was substantially dependent on the performance of the properties in which the partnership invested.
Regarding Mr. Bonilla’s conduct, FINRA specifically alleged:
- Bonilla did not perform reasonable diligence on the partnership prior to recommending the common units to customers.
- Bonilla did not know how the partnership generated funds to pay investors monthly distributions.
- Bonilla did not know how the price of the common units reflected on customer account statements were calculated.
- Bonilla did not read the full prospectus, nor did he review the partnership’s financial statements.
- Without a sufficient understanding of the fundamental features and risks of the partnership, Mr. Bonilla recommended that two of his customers collectively invest over $650,000 in the partnership,
- Bonilla received $18,061.31 in commissions from the transactions.
- In March 2020, the partnership notified its common unit holders that it was suspending distributions until further notice.
- At the time, the customer was 28 years old, in the 15 percent tax bracket, and starting her own business.
Financial Advisor Charles Bonilla (CRD No. 2572107)
Mr. Bonilla has 21 years of experience in the securities industry and has been employed by eight different firms. Since 2008, he has been associated with the following firms:
- Pruco Securities, LLC in Boca Raton, FL, from May 2018 – February 2019.
- David Lerner Associates, Inc. in Boca Raton, FL, from December 2015 – May 2018.
- Scottrade, Inc. in Aventura, FL, from January 2008 – December 2014.
Scottrade, Inc. fired Mr. Bonilla in December 2014, alleging that he engaged in a business activity without receiving proper approval from the firm.
Charles Bonilla also goes by the following names: Charles A. Bonilla, Charles Abad Santos Bonilla, and Charles Abadsantos Bonilla.
David Lerner Associates, Inc.: A Duty to Supervise
Financial institutions, like David Lerner Associates, must properly supervise financial advisors and customer accounts. Brokerage firms are required to establish and maintain a reasonably designed system to oversee account activity, such as transactions in energy-sector securities, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.
How to Recover Losses or Obtain a Free Consultation
If you have suffered financial losses investing with Charles Bonilla or suspect that Mr. Bonilla did not have your best interest in mind when recommending investments, such as energy-sector mutual funds and limited partnerships, contact New York securities arbitration lawyer August Iorio of Iorio Altamirano LLP at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.