Charles McInnis of Miami, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) in connection with a contingent private placement offering of senior secured notes issued by a Columbian energy company. FINRA found Mr. McInnis did not understand the specific requirements of two exemptions from registration applicable for the private placement offering and failed to ensure that his customer’s purchases of the notes complied with the requirements of either of the exemptions.
From July 2009 through his resignation in August 2013, Mr. McInnis acted as President, Chief Executive Officer and Chief Compliance Officer for CP Capital Securities, Inc. (CP Capital). During this time period, Mr. McInnis was delegated responsibility to supervise CP Capital and its associated persons’ participation in a minimum contingency private placement offering. A private placement is generally an offering between only a select few investors in order to raise capital without registration with the Securities and Exchange Commission (SEC). Private placement offerings must satisfy certain conditions (safe harbors) to avoid registration with the SEC. For this offering, the Notes were unregistered securities exempt from the registration requirements of Section 5 of the Securities Act pursuant to the Rule144A safe harbor and the Regulation S exemption.
According to FINRA, Mr. McInnis used questionnaires to determine if a customer fit within the requirements of the Rule 144A safe harbor or the Regulation S exemption provisions. FINRA found that Mr. McInnis failed to recognize that the questionnaires were “not designed to determine if the customer’s investments in the offering would qualify for either exemptions. FINRA alleged that Mr. McInnis did not understand specific requirements of minimum contingency private placement offerings. According to FINRA, Mr. McInnis just accepted investments from CP Capital customers to ensure the minimum $5 million for the offering was met by its closing date.
FINRA alleged that Mr. McInnis’s conduct was a direct violation of NASD Rule 3010(a) and FINRA Rule 2010. Without admitting or denying the FINRA allegations, Mr. McInnis agreed to a suspension from association with any FINRA member in any capacity for a period of 18 months.
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 to unsuitable recommendations or trades in your investment account? 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 35 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 firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.