Broker-Dealer Fined for Failing to Return Funds after Material Changes in Private Placement Offerings

A broker-dealer settled FINRA charges for permitting "material changes to the terms of two related private placement offerings without terminating the offerings and returning funds to investors."

In a Letter of Acceptance, Waiver, and Consent, FINRA said that the broker-dealer had a private placement memorandum agreement for two related contingent private placement offerings that stipulated a closing would not occur until a minimum contingency of $16 million in investor subscriptions was met. FINRA found that on two separate occasions, the issuer made material changes to the agreement by reducing the minimum contingency amount and the broker dealer failed to terminate the offerings and return the funds to the investor.

FINRA stated that the broker-dealer violated Exchange Act Rule 10b-9 ("Prohibited representations in connection with certain offerings") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to a (i) censure and (ii) $90,000 fine.

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