KCD Financial Inc. Censured & Fined
According to FINRA, on May 30, 2017, KCD Financial Inc. (CRD #127473, Green Bay, Wisconsin) a Securities and Exchange Commission (SEC) Decision became final in which the firm was censured and fined $73,000. The SEC sustained the findings and sanctions imposed by the National Adjudicatory Council (NAC).
The sanctions were based on findings that the firm sold at least $2 million in unregistered securities and failed to supervise its representatives’ sales of unregistered securities.
The findings stated that the unregistered securities were purported to be exempt from registration pursuant to a registration exemption under Rule 506 of Regulation D that, among other things, prohibited the issuer from engaging in a “general solicitation” or “general advertising.” Shortly after the offering commenced, the issuer generated a press release concerning the launch of the investment fund, which resulted in newspaper articles that the issuer promptly posted on its affiliate’s unrestricted website. The content of the articles was designed to arouse public interest in the securities offering.
The issuer’s securities attorney contacted the firm and informed it that the newspaper articles amounted to a breach of the prohibition against general solicitation and advised the firm that the newspaper articles should not be posted on the issuer’s website.
Despite the attorney’s warning, KCD Financial Inc. did not prohibit sales of the offering. Instead, the firm took some efforts to limit sales only to accredited investors with whom the firm had a prior relationship and investors who did not see the newspaper articles, and it made ineffective attempts to have the articles removed from the affiliate’s website.
The SEC found that the firm should have directed its prompt and full attention to the breach of the prohibition against general solicitation, that stopping the unregistered sales of the offering was the only acceptable response, and that the firm’s efforts to limit sales were irrelevant to whether the articles constituted a general solicitation.
For FINRA’s full findings see FINRA Case #2011025851501.
This information, which is publicly available on FINRA’s website has been provided by The White Law Group.
If you have questions about investments you made with KCD Financial Inc., the securities attorneys of The White Law Group may be able to help you. To speak with a securities attorney, please call 888-637-5510.
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