The Financial Industry Regulatory Authority has ordered another 10 individuals and 8 financial firms to pay $3.2M in restitution to clients who were sold interest in risky private placements that were issued by DBSI, Inc., Medical Capital Holdings, Inc., and Provident Royalties, LLC. The parties that were sanctioned allegedly sold the interests without having reasonable grounds to recommend the securities to customers. The SRO believes there were inadequate supervisory systems in place.
FINRA fined the following parties for allegedly failing to reasonably investigate the private placement offerings to ensure that the firms making the sales were fulfilling their obligation to customers.
• NEXT Financial Group, Inc.: $2 million in restitution and a $50,000 fine. VP Steven Lynn Nelson was fined $10,000 related Provident Royalties private placements sales.
• Investors Capital Corporation: About $400,000 in restitution over Provident Royalties private placement sales and a CIP Leveraged Fund Advisors-offering.
• Garden State Securities, Inc.: $300,000 related to a Medical Capital private placement. Kevin John DeRosa was fined $25,000. Vincent Michael Bruno, who is chief compliance officer, will pay a $10,000 fine.
• Capital Financial Services: Clients will get $200,000. Ex-principal Brian W. Boppre is fined $10,000. Private placements from both Medical Capital and Provident Royalties were involved.
• National Securities Corporation: $175,000 in restitution related to the sale of Provident Royalties and Medical Capital private placements. Director Matthew G. Portes was suspended and fined $10,000.
• Equity Services, Inc.: Nearly $164,000 in restitution and a $50,000 fine. Sr. VP Stephen Anthony Englese was fined $10,000 while representative Anthony Paul Campagna must pay $25,000.
• Securities America, Inc.: Fined $250,000.
• Newbridge Securities Corporation: A $25,000 fine related to private placements sold by DBSI and Medical Capital. Ex-Chief Compliance Officer Robin Fran Bush was fined $15,000.
• Former Meadowbrook Securities CEO and President of LLC Leroy H. Paris II must pay a $10,000 fine related to the sale of Medical Capital and Provident Royalties private placements.
• Michael D. Shaw was barred from the securities industry. He was previously associated with VSR Financial Services, Inc.
Between ’01-’09, Medical Capital Holdings was able to raise about $2.2 billion through the private placement offerings of promissory notes. Over 20,000 investors participated. Meantime, from September ’06 to January ’09, Provident Asset Management, LLC sold and marketed limited partnerships and stock in 23 private placements issued by Provident Royalties. More than $485 million was raised from over 7,700 investors who made their purchases through over 50 retail broker-dealers. Last year, however, a number of the private placement deals soured, causing a number of broker-dealers that sold them to shut down, while the investors sustained financial losses.
FINRA Sanctions Eight Firms and 10 Individuals for Selling Interests in Troubled Private Placements, Including Medical Capital, Provident Royalties and DBSI, Without Conducting a Reasonable Investigation, FINRA, November 29, 2011
FINRA fines eight firms for private placement sale, Reuters, November 29, 2011
More Blog Posts:
FINRA Wants Brokers Selling Regulation D Private Placements to Take Part in Tougher Due Diligence Process, Stockbroker Fraud Blog, June 7, 2011
Boogie Investment Group Inc. Fails Because of Fraudulent Private Placements by Provident Royalties LLC and Medical Capital Holdings Inc., Stockbroker Fraud Blog, October 27, 2011
Ban on Private Securities Offerings Solicitations Could Be Revised by SEC or Congress, Says Ex-Official, Institutional Investor Securities Blog, July 11, 2011