Ex-Rep of Expelled Firm Suspended for Deceptive Marketing and Pandemic Fraud

The Financial Industry Regulatory Authority announced that it has suspended former SW Financial LLC general securities representative Martin A. Barth for alleged rule violations related to the marketing of private placement offerings, along with misrepresentations related to pandemic unemployment assistance, or PUA.

FINRA reported that, between September 2018 and September 2019, Barth played a key role in sourcing and managing two private placement offerings at SW Financial. These offerings, structured through investment funds designed to invest in a real estate investment trust, or REIT, were marketed to investors and other representatives within the firm. Barth was reportedly involved in the review and dissemination of offering documents, including private placement memoranda and subscription agreements. These offering documents disclosed that the firm and the selling representative were to receive a 5% sales commission and SW Financial would receive a 3% dealer-manager fee, but they did not mention that Barth would receive additional compensation through his association with an affiliate of the REIT’s management company.

Furthermore, FINRA stated that Barth omitted information about the financial instability of the REIT’s management company, including its prolonged and unsuccessful attempts at going public and its negative cashflow position. Additionally, he failed to disclose that the REIT and the investment funds were under common control, thereby misleading investors into believing that the transaction was conducted at arm’s length. FINRA also noted that Barth either knew or was negligent in not knowing these facts, which were material to investors’ decision-making.

Ultimately, 21 investors, including two of Barth’s own clients, purchased approximately $1.6 million of the securities. Barth earned more than $30,000 in compensation for his role, over $23,000 of which came from the undisclosed affiliate payments.

According to FINRA, these omissions and misrepresentations violated Section 17(a) of the Securities Act of 1933, which, among other things, prohibits obtaining money or property by untrue statements or omissions of material facts, and Rule 2010 requires FINRA members to observe high standards of commercial honor and just and equitable principles of trade.

Additionally, FINRA said that between April and May 2020, Barth applied for PUA benefits through the New York State Department of Labor, even though he was receiving income from both SW Financial and an outside business activity that he had disclosed to the firm. From May 2020 through September 2021, Barth submitted 70 certifications claiming PUA benefits, representing that he did not work and did not receive compensation exceeding $504 during the prior week. Because of his “reckless misrepresentations and omissions of material facts,” Barth received approximately $37,000 in unemployment assistance while simultaneously earning about $50,000 in compensation from ongoing business activities, another violation of FINRA Rule 2010.

Without admitting or denying the findings, Barth consented to a 16-month suspension. No monetary sanctions were imposed due to Barth’s demonstrated inability to pay.

The action against Barth follows a broader pattern of regulatory enforcement against SW Financial. In 2023, SW Financial was expelled from FINRA membership after findings of widespread misconduct, including the sale of speculative private placements with misleading marketing practices, churning customer accounts and failing to supervise its representatives.

According to brokercheck.finra.org, Barth was presently serving at NI Advisors and had previously been registered through SW Financial from 2018 to 2022. Before that, Barth was registered with Windsor Street Capital, LP, formerly known as Meyers Associates, LP, a firm which also had regulatory challenges due to “misleading sales literature” before being expelled from FINRA in 2018. Barth has also previously held positions at Merrill Lynch and Wells Fargo, among others.

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