A broker-dealer settled FINRA charges for supervisory failures in connection with its EB-5 Immigrant Investor Program business operations.
In a Letter of Acceptance, Waiver, and Consent, FINRA determined that the broker-dealer acted as a placement agent and finder for two registered representatives in their EB-5 program operations. The program involved the solicitation of foreign investors. FINRA found that the broker-dealer inaccurately represented the EB-5 business as outside business activity ("OBA") that the firm was not required to supervise.
FINRA stated that the broker-dealer failed to (i) include in its written supervisory procedures provisions concerning the solicitation of customers for EB-5 project investments and (ii) review the registered representatives' OBA websites, which included false assertions of FINRA and SEC endorsement and imbalanced descriptions of the risks and potential benefits of investments.
FINRA also found that the broker-dealer did not make timely filings in connection with 16 private placement offerings, submitting some offering documents 75 to 1,041 days after the required deadline pursuant to FINRA Rule 5123 ("Private Placements of Securities").
As a result of its findings, FINRA determined that the firm violated NASD Rule 3010 and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2210 ("Communications with the Public"), 3110 ("Supervision") and 5123.
To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $50,000 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.