ARTICLE
22 January 2021

Firm Settles FINRA Charges For Violating Private Placement Content Standards

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
A firm settled FINRA charges for violations of content standards in private offerings sold by the firm and sent to potential investors.
United States Finance and Banking

A firm settled FINRA charges for violations of content standards in private offerings sold by the firm and sent to potential investors.

In a Letter of Acceptance, Waiver and Consent, FINRA said the firm distributed communications related to private placement offerings that violated FINRA Rule 2210 ("Communications with the Public"). The communications contained projections of performance that failed to "provide a sound basis" for evaluating the facts regarding the securities products or services. Further, FINRA said the firm misrepresented these offerings by:

  • failing to specify one offering was "speculative, illiquid, and could result in a total loss of the investment";
  • failing to disclose material differences between two private placements and less risky investments;
  • describing an illiquid investment as an offering having "enhanced liquidity"; and
  • inaccurately describing the use of funds by the issuer.

As a result, the firm also violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

The firm also settled FINRA charges for the untimely filing of placement memoranda in violation of FINRA Rule 5123 ("Private Placements of Securities").

To settle the charges, the firm agreed to (i) a censure and (ii) a $35,000 fine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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