Private Offerings (a/k/a Reg D Offerings) Continue to Haunt Brokerage Firms

 

National Securities Corp. is the latest broker-dealer in FINRA’s crosshairs over the sale of fraudulent private placements, according to Bruce Kelly’s InvestmentNews article titled “Finra goes after yet another B-D in private-placement crackdown.”

National Securities apparently received a Wells notice last month from FINRA, the Financial Industry Regulatory Authority Inc., indicating that FINRA intends to bring an enforcement action against National Securities.

National Securities sold retail customers approximately $3.7 million of notes issued by Provident Royalties LLC, according to the article, which referenced Provident’s bankruptcy filings. The Provident offering involved oil and gas private placements that the Securities and Exchange Commission found were fraudulent,

The Wells notice sent to National Securities relates to violations of product suitability rules, e-mail supervision rules, and standards of commercial honor and principles-of-trade rules in connection with the sale of “a private placement,” according to the article, referencing FINRA’s BrokerCheck report (or CRD).
FINRA’s top enforcement priorities are said to be broker-dealers’ sale of private placements and non-traded real estate investment trusts.

Earlier this month, Workman Securities Corp. settled a FINRA enforcement action by agreeing to pay $700,000 for partial restitution to more than a dozen clients who had sued the firm over investments in Medical Capital Holdings Inc. and Provident Royalties. Like Provident, the SEC charged Medical Capital with fraud in 2009.

QA3 Financial Corp., another leading seller of Provident deals, recently withdrew its registration with FINRA and the SEC, effectively ceasing to operate as a broker-dealer.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing institutional and individual investors in investment-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions.