National Securities Is Latest Broker-Dealer to Be Disciplined in FINRA's Crackdown
Earlier this month, FINRA officials announced that Regulation D private placements and non-traded real estate investment trusts (REITs) would be FINRA’s top areas of focus this year. The increased scrutiny is largely the result of the self-regulatory agency’s concerns over the lack of due diligence many independent broker-dealers have exhibited and continue to exhibit in the sale of private placements and non-traded REITs. (For more information, see our Feb. 10 post on the announcement.)
In January, National Securities Corp., a broker-dealer that sold approximately $3.7 million of Provident Royalties LLC private placement notes, received notice from FINRA that the agency planned to bring an enforcement action against the firm (“Finra goes after yet another B-D in private-placement crackdown,” InvestmentNews, Feb. 15, 2011).
As reported in the InvestmentNews article, FINRA plans to bring an action against National Securities Corp. for “violations of product suitability rules, e-mail supervision rules, and standards of commercial honor and principles-of-trade rules” in the sale of a “private placement.”
The Provident Royalties private placement notes (along with those issued by Medical Capital Holdings) have contributed to the closure or FINRA sanction of over two dozen broker-dealers in the last year or so, ever since the SEC brought a complaint against Provident Royalties in 2009. The complaint alleged that the oil and gas private placements issued by Provident Royalties were fraudulent. The firm has since declared bankruptcy.
National Securities Corp. did not offer a comment on the impending action to the InvestmentNews staff. The firm’s profile on FINRA’s BrokerCheck tool has been updated to reflect the notice.