Broker-Dealer Settles Charges for Contingency Offering Disclosure Violations

A broker-dealer settled FINRA charges for failing to notify investors of two separate extensions of the offering termination date of a contingency private placement offering.

FINRA found that (i) the minimum contingency had not been met by the original termination date, and (ii) the broker-dealer did not give investors the option to withdraw their funds after the termination date but rather extended the termination date without the investors' affirmative consent. FINRA said that the private placement memorandum allowed the broker-dealer to extend the termination date up to two weeks with investor approval, but found that the date was extended by more than two weeks without approval, and then again by two days when the minimum contingency still had not been met.

FINRA determined that the broker-dealer willfully 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 (i) a censure and (ii) a civil monetary penalty of $17,500.