As an expert in finance and law with over a decade of experience, I’ve seen my fair share of cases involving misrepresented investments. The allegations against Gihan Fernando, a broker registered with Cetera Investment Services, are particularly serious. According to dozens of investor disputes, Mr. Fernando misrepresented non-traded real estate investment trusts (REITs) to his clients. This is a grave violation of the trust placed in financial advisors.
Investment fraud and bad advice from financial advisors are unfortunately all too common. A study by the University of Chicago and University of Minnesota found that bad financial advisors cost investors up to $17 billion per year. Financial advisor complaints and cases like this highlight the importance of thoroughly vetting your advisor and understanding your investments.
The Seriousness of the Allegations
Between 2020 and August 2024, more than 50 parties of investors filed disputes involving Mr. Fernando. The disputes allege misrepresentation during the sales process of non-traded REITs. His former member firm has settled 58 of the disputes for a total of more than $7.5 million. Two disputes are still pending, seeking more than $644,000 in damages. As an investor, discovering that your trusted advisor misled you about your investments is a devastating blow, both financially and emotionally.
Famous investor Warren Buffett once said, “Risk comes from not knowing what you’re doing.” In this case, it seems investors were unaware of the true nature and risks of the REITs they were sold, due to alleged misrepresentation. This left them vulnerable to significant losses.
Fernando’s Background and Defense
According to his BrokerCheck profile, Gihan Fernando began his career as a broker in 2002 with Morgan Stanley in Houston, Texas. In 2003, he moved to BOK Financial in Bellaire, Texas, where he remained until 2023. He then registered with Cetera Investment Services in Houston, where he is still based.
In statements responding to the allegations, Mr. Fernando asserts that the disputes involve non-traded REIT investments offered by his former employer, Bank of Oklahoma Financial. He claims the firm told him they had thoroughly vetted the investments to ensure they would perform as promised. He also states he was instructed to sell the products by his employer.
FINRA Rules and Consequences
Financial Industry Regulatory Authority (FINRA) Rule 2020 prohibits brokerage firms and their registered representatives from making material misrepresentations to their customers. Misrepresenting investments is a serious violation that can result in disciplinary action by FINRA, including fines, suspensions, or even being barred from the industry.
In July 2024, the Texas State Securities Board sanctioned Mr. Fernando, finding that he recommended illiquid non-traded REITs to investors based on information from the issuers rather than conducting his own thorough due diligence. Regulators determined his sales constituted an inequitable business practice and issued him an official reprimand.
Lessons Learned and Next Steps
For investors, this case underscores the importance of thoroughly understanding your investments and regularly reviewing your accounts. Don’t be afraid to ask questions and request clear explanations. If something seems off, trust your instincts and seek a second opinion.
If you invested in non-traded REITs or other products recommended by Gihan Fernando and have concerns, know that you have rights, including the ability to file a FINRA arbitration claim to pursue damages. Speaking with an experienced securities attorney can help you understand your options. With allegations of this magnitude, it’s crucial to act promptly, as there may be a limited window to file a claim.
Navigating the complex worlds of finance and law can be daunting, but with the right knowledge and advocacy, investors can protect their interests and recover losses stemming from misconduct. As an expert in these fields, my mission is to shine a light on cases like this and empower investors to take action when wronged.