FINRA Fines National Securities Corp Over 650K Over Pre-IPO Placement

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On Wednesday, the Financial Industry Regulatory Authority Inc. fined national Securities Corp $663,000 on Wednesday for misrepresenting investors regarding the share prices in a private placement sale in December 2017 and January 2018.

The Boca Raton, Florida-based NSC is expected to pay a fine of $300K and disgorgement of $363K plus interest in the matter. The company didn’t admit or deny Finra’s conclusions as part of that agreement. On Friday, a corporate spokeswoman did not respond to a request for comment.

NSC issued a pre-initial public offering managed through its associated investment adviser during a two-month period. As per FINRA, the company deceived investors by providing holdings in a privately owned firm at a price not exceeding $9.75 a share, even though the company had been unable to obtain shares at that price.

FINRA stated that the offering ended up buying the company in question’s shares for more than twice the price stated in the offering documentation, violating regulations.

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According to Finra, NS allegedly failed to adequately enforce written processes relating to the “pre-IPO” shares offering and didn’t reasonably oversee its private stock company leader, both of which were in breach of industry regulations.

At the end of December, the company disclosed to the SEC that it had set aside around $4 million for civil disputes at the end of the third quarter, which was almost four times the amount the company had set aside earlier.

In October 2020, FINRA sanctioned NSC for several violations that included failure to observe reporting requirements and failure to implement written supervisory processes associated with reporting obligations from May 2015 to November 2018.

Between July 2015 and March 2017, NSC was also fined for failure to create, maintain, and implement documented contingency offer supervision processes. NSC has been censured and fined thrice since 2011. Customers have also complained about NSC. Since 2002 FINRA has fined NSC four times because of supervisory and reporting-related violations.

FINRA censured and penalized the company $125,000 in 2020 after failing to file adjustments to Uniform Applications for Securities Industry Registration or Transfer, and Uniform Termination Notices for Securities Industry Registration. During that period, NSC failed to report a settlement of $30 regarding a client’s claim for losses due to a sales practices breach. Also, NSC didn’t report or its delay in reporting summary and statistical information to FINRA about 19 written client claims.

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In January 2016 the company was jointly liable for $37,401 in damages after an investor alleged that it had recommended reversible convertible products purchase. As a result, the company was supposedly accused of fiduciary duty and conduct breach, fraud, negligent supervision, negligence, unauthorized trading, and failure to diversify. Also, in July of the same year, a client was granted compensatory damages of $353,143 after the client indicated that their financial planner had aggressively bought and sold speculative stocks through their accounts without consent. As per the claim, there was negligence, unauthorized trading, fiduciary duty breach, unjust enrichment, and breach of contract.

 

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