Workman Securities Corporation (CRD #31898, Eden Prairie, Minnesota) recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and ordered to pay $700,000 in partial restitution to investors. The firm was also ordered to certify in writing to FINRA that it has established and implemented a system and procedures reasonably designed to achieve compliance with recordkeeping requirements related to electronic communications, and provide a written report to FINRA describing the policies, procedures and controls it has established and implemented related to the integrity of the retention and retrieval process for electronic communications, and the supervisory system it has implemented to oversee the preservation of electronic communications.
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to have reasonable grounds to believe that a private placement an entity offered pursuant to Regulation D was suitable for any customer, after it received red flags that the entity had financial issues and was not timely making interest payments, but continued to sell the offering to customers. The findings stated that the firm failed to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and NASD and FINRA rules in connection with the sale of private placements, and failed to conduct adequate due diligence of the private placements or confirm that its representatives were doing their own due diligence. The findings also stated that the firm failed to conduct adequate due diligence of private placements other entities offered, and failed to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and NASD and FINRA rules in connection with the sale of the private placements the entities offered pursuant to Regulation D. The findings also included that the firm reviewed cursory private placement memoranda (PPMs) for the offerings , failed to investigate red flags or analyze third-party sources of information or take affirmative steps to ensure the information in the offering documents was accurate.
FINRA found that the firm failed to preserve electronic communications in a non-rewritable, non-erasable or “WORM” format that complied with books and records requirements, and the firm used third-party software for storing and retaining electronic communications that did not comply with the requirements of SEC Rule 17a-4(f). FINRA also found that the firm was informed that its electronic storage medium was non-compliant but did not take adequate remedial action to retain email properly.
This information which is publicly available on FINRA’s website has been provided by The White Law Group, LLC.
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