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NEWSLETTERS & ALERTS
Firms Failed to Supervise Outside Business Activities, Private Securities Transactions
by Howard Haykin
CapFi Partners agreed to a $12.5K fine to settle FINRA charges pertaining its supervision of outside business activities and private securities transactions by its registered reps. TGP Securities agreed to a $10K fine to settle FINRA pertaining private securities transactions by its registered reps. In each case, FINRA imposed a lower fine after considering, among other things, each respective firm’s revenue and financial resources.
BACKGROUNDS. McLean, Va-based CapFi Partners, a FINRA member since 2001, has some 6 registered reps and one branch office. CapFi's principal activities are the marketing of hedge funds and private equity funds, the private placement of securities, and investment advisory services. The firm had no relevant disciplinary history.
Summit, NJ-based TGP Securities, a FINRA member since 2012, has some 17 registered reps. Its principal activity is the private placement of securities. TGP had a prior AWC relating to review and retention of email.
FINRA FINDINGS – CAPFI PARTNERS. In October 2014 and November 2014, CapFi failed to document its review of 2 separate requests from registered reps to engage in outside business activities and one request to engage in private securities transactions. While the firm orally conveyed its approval or disapproval to the RRs, it never documented its review and disposition of these requests. Such failures would be in violation of FINRA Rule 3270 and other rules.
From March 2012 to September 2015, CapFi failed to review the electronic communications for one of its registered reps. Such oversights would be in violation of FINRA Rule 3110 and other rules.
FINRA FINDINGS – TGP SECURITIES. From November 2014 through March 2015, a TGP Securities registered rep executed transactions on behalf of his investment advisory customers through another brokerage firm. From December 2013 to February 2015, a different registered rep solicited investments in private securities offerings through his own investment advisory firm. Both RRs received compensation for these activities.
While both registered reps disclosed these outside activities, TGP Securities never recorded the transactions on its books, and did not supervise their participation in these private securities transactions.
These cases were reported in FINRA Disciplinary Actions for May 2017.
For details on the CapFi Partners case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015043383901.
For details on the TGP Securities is case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015043159502.