Published on:

Carolina Financial Securities Fined For Failure to Supervise the Sale of Private Placements

Brevard, North Carolina-based Carolina Financial Securities, LLC (Carolina Financial) consented to, but did not admit to or deny, the described sanctions and to the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that it failed to supervise the sale of an unregistered private placement offering to investors with investments of approximately $1.1 million. FINRAs findings stated that Carolina Financial neglected to follow its procedures with regard to the review and verification of statements made in private placement offering documents. Furthermore, FINRA found that the brokerage firm failed to conduct adequate due diligence prior to the approval of the offering for sale to its investors.

According to FINRA, Carolina Financial failed to supervise several aspects of the offering’s private placement memorandum (PPM). First, Carolina Financial neglected to ensure that the PPM included all necessary material information. Second, Carolina Financial failed to review the underlying loan agreement for the property which was involved in the offering. Third, the firm failed to discover that the PPM did not disclose a material capital call provision in the aforementioned loan agreement. Lastly, Carolina Financial approved the private placement offering to its investors without verifying the details of the loan agreement made in the PPM. Consequently, Carolina Financial was censured and fined $50,000 by FINRA.

Brokerage firms must establish and implement a reasonable supervisory system to protect customers from stockbroker misconduct and to prevent unnecessary investment losses. If broker-dealers do not establish and implement these protective measures, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages as a result of a stockbroker’s unsuitable recommendation can bring forth claims to recover losses against broker-dealers like Carolina Financial Securities, which should consistently oversee its sales activities in order to prevent the above described prohibited conduct.

Have you suffered losses in a private placement investment? Have you suffered losses in your Carolina Financial Securities or any other brokerage account due to unsuitable recommendations or the failure to supervise by your broker-dealer? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Carolina Financial Securities and its stockbrokers who may have engaged in misconduct and caused investors losses.

The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over , Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.