Robert Lee Keys, a Registered Principal with the Private Consulting Group, settled FINRA charges that he made untrue statements and omissions in connection with the sale of a security.  He specifically recommended that a customer invest $1.1 million in a promissory note, representing that the  promissory note was secured by $1.1 million in U.S. T-Bonds when, in fact, no such bonds existed.  Keys also provided the customer with wiring instructions that directed the funds to be sent, not to an escrow agent, but to the bank account of the issuing entity’s owner. 

Keys allegedly failed to conduct adequate due diligence, in that he: 

• did not investigate the issuer;
• did not ascertain that T-bonds existed.
• relied, instead, on information given during a conference call initiated by the issuer’s owner to an unknown individual who claimed to be a representative of a well-known financial institution that purportedly served as the current custodian of the bonds. 
• failed to verify the identity of the unknown individual on the call. 
• did not disclose the compensation, direct or indirect, that he expected to receive, at the time he made the recommendation to the customer.

Customer first learned that a commission would be paid on the sale of the note when she received the note itself - several weeks after wiring the funds.  However, the note disclosed only that a $50,000 commission would be paid to Keys’ member firm, and did not disclose that Keys owned the entity that received an additional $50,000. 

Keys supposedly was responsible for his firm’s supervisory control pols and procedures, but failed to ensure that an individual at the firm who was senior to, or otherwise independent of, himself supervised and reviewed his customer account activity. [C-I Note:  Supervising a Producing Principal.]

Mr. Keys was barred.  This is FINRA Case #2009017125101.   [April 2011 Disc. Actions]