FINRA Fines Firm for Failing to Terminate Contingency Offerings after Material Changes

A placement agent settled FINRA charges for failing to terminate contingency offerings after material changes to their terms.

According to the AWC, the contingent private placement offerings required specified minimum contingencies to be met before investor funds could be released to the issuer. FINRA found that on three separate occasions, the issuer made material changes to the offering terms, including lowering the minimum contingency amount and reducing the per-share price, but the firm, acting as placement agent, failed to terminate the offerings or return investor funds.

FINRA determined that the firm violated Exchange Act Rule 10b-9 ("Prohibited representations in connection with certain offerings") and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3110 ("Supervision").

In the settlement, the firm agreed to a (i) censure, (ii) pay a $90,000 fine and (iii) an undertaking to remediate the issues identified.