CP Capital Securities, Inc. (CP) of Miami, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to maintain proper supervisory procedures in connection with private placement offerings. FINRA noted that CP had participated in several minimum contingency private placement offerings without “adequate supervisory procedures.”
A private placement is generally an offering between only a select few investors in order to raise capital without registration. Private placement offerings must satisfy certain conditions to avoid registration with the Securities and Exchange Commission (SEC). CP’s failure to supervise those offerings put the exemptions in jeopardy.
In CP’s case, FINRA found that from October 2011 through December 2011, CP acted as co-placement agent in a minimum contingency private placement offering receiving compliance with 144A/Section 4(a)(1) and Regulation S. The sections provide conditions that must be satisfied in order to avoid registration with the SEC. Rule 144A governs the private resales of securities to institutions preliminary notes and Regulation S governs offers and sales made outside the United States without registration. The findings stated that the designated supervisor who approved the offering for sale to firm customers failed to understand the basic requirements of Rule 144A and Regulation S of the Securities Act of 1933, and did not take any steps to investigate whether or not the specific customer investments in the offering qualified for those exemptions.
FINRA found that CP failed to meet the requirements in these rules and therefore failed to adequately supervise and maintain proper books and records. FINRA found that the up to $25 million offering of senior secured notes were sold to customers who did not meet the conditions of Rule 144A and Regulation S. FINRA alleged that CP sent accepted investments from investors, who provided information in response to questionnaires that wouldn’t meet the conditions of the offering exemptions. Accordingly, FINRA found CP violated NASD Rule 3010(a) and FINRA Rule 2010.
Without admitting or denying the FINRA allegations, CP agreed to the sanctions and was ordered to pay a $70,000 fine.
FINRA rules require brokerage firms to establish and implement a reasonable supervisory system to protect customers from the risks associated with investing. The implementation of the rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for investment losses which stem from their employees’ misconduct. Therefore, investors who have suffered losses due to a brokerage firm’s failure to supervise the unsuitable recommendations of its representatives can bring forth claims to recover damages against firms, like CP Capital Securities, which have a duty to supervise employees in order to protect their customers’ interests.
Have you suffered losses in your CP Capital Securities account due unsuitable recommendations or a brokerage firm’s failure to supervise? 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 CP Capital Securities 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 40 years, 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 email@example.com for answers to any of your questions about this blog post and/or any related matter.