Brokerage Firm Settles FINRA Charges for Failing to Disclose Material Facts to Investors

A broker-dealer settled FINRA charges for failing to disclose to investors that certain issuers of securities offerings failed to timely file audited financial statements with the SEC.

In a Letter of Acceptance, Waiver, and Consent, FINRA stated that the firm sold interests in the securities to nine investors after it knew that the filings would be delayed (due to pending completion of an audit) and without disclosing the audit to the investors. FINRA said that the delay in filing and the accompanying justification is materially important to investors, and thus should have been disclosed.

As a result, FINRA determined that the firm violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) accept a censure, (ii) pay a civil monetary penalty of $50,000 and (iii) pay partial restitution totaling $64,800 plus interest.