Broker-Dealer Settles Charges for Failing to Disclose Issuer Delays in Filing Audited Financial Statements

A broker-dealer settled FINRA charges for selling limited partnership interests in securities without disclosing that the issuer failed to timely file an audited financial statement.

In a Letter of Acceptance, Waiver, and Consent, FINRA stated that certain classes of securities issued by two limited partnerships were in the process of being registered with the SEC but that filings of audited financial statements were delayed, pending a forensic audit. FINRA found that the broker-dealer sold 37 limited partnership interests without disclosing these delays. FINRA said the delay in filing these audited financial statements, and the reasons for the delay, constituted material information and should have been disclosed to investors.

FINRA determined that the failure to disclose the delays violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). To settle the charges, the broker-dealer agreed to (i) a censure and (ii) $268,082 in partial restitution, plus interest.