Firm, brokers accused of securities fraud

The Utah Division of Securities is alleging that First Western Advisors Inc., along with two current and two former brokers, were part of securities fraud involving nine Utahns who invested more than $20.6 million.

The division said Monday that it has filed a petition to revoke and bar licenses and impose fines against First Western and brokers Gary W. Teran, Carl A. Page, David A. Russon and Brian G. Kasteler. Teran, the company's president, said Russon and Kasteler are former brokers.

Teran said Monday that the company was "surprised and disappointed" by the division's action and planned to "vigorously defend this case."

The division said the clients' investments were placed into share levels with higher commissions and fees without disclosing that to the investors.

Specifically, the division said, the agents invested in Class B shares, which have higher costs and higher commissions for the agents than Class A shares of the same fund. But some clients believed they owned Class A shares based upon Morningstar "Snapshot" reports the agents sent that reflected mutual fund performance for Class A shares, the division said.

The division also said that the nine investors testified to the Securities and Exchange Commission, but that the agents tried to contradict their statements by having them sign "Mutual Fund Disclosure Statements" and "Declarations" suggesting that the investors were always aware of the brokers' actions.

The filing also charges First Western with failing to maintain accurate books and records and failing to supervise the activities of the four brokers.

The alleged actions violate the Utah Securities Act and include eight counts of violating securities laws, including securities fraud for failing to disclose material facts to clients, recommending unsuitable investments, giving false account information to clients and attempting to change client testimony to the SEC, the division said.

The company and the agents have 30 days to respond to the securities division.

In an e-mailed response to the Deseret Morning News, Teran said the company was surprised to learn about the division filing.