A firm settled FINRA charges for inadequate written supervisory procedures (or "WSPs") in connection with certain private placements, and for failing to make timely private placement filings.
In a Letter of Acceptance, Waiver and Consent, FINRA alleged that, for two private placement offerings, the firm failed to (i) conduct and record adequate investigations of the offerings prior to recommending them to customers, and (ii) examine the issuers' business plans and models, and industry prospects or potential regulatory restrictions impacting the issuers' businesses. FINRA found that the firm inappropriately relied nearly exclusively on information and documents provided by the issuers, leading to the firm's failure to discover pertinent information, including that there was a "securities-related litigation against a key director and officer of the issuer."
Additionally, FINRA found that, in violation of FINRA Rule 5123 ("Private Placements of Securities"), the firm failed to timely submit filings to FINRA for 26 different private placements.
These failures resulted in violations of FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3110 ("Supervision"). To settle the charges, the firm agreed to (i) a censure and (ii) a $40,000 fine.
Primary Sources
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.
