FINRA Sanctions National Securities Corp for Misconduct involving Pre-IPO Sales
According to a document posted this week by the Financial Industry Regulatory Authority (FINRA), the regulator has censured and fined National Securities Corp (CRD No. 7569) $300,000 plus disgorgement of $363,447.67 plus interest for rules violations involving the sales of “pre-IPO” private placement offerings.
In December 2017 and January 2018, the firm reportedly sold a “pre-IPO” private placement offering managed by its affiliated investment adviser. In connection with that offering, National Securities Corp allegedly deceived investors by offering interests in a private unnamed company at a price not to exceed $9.75 per share, even though the firm had failed to locate shares available at that price.
The offering eventually purchased shares in the company at more than double the maximum price listed in the offering documents in violation of FINRA Rule 2010.
The firm also purportedly failed to reasonably enforce its written procedures concerning the offering of “pre-IPO” shares and failed to reasonably supervise the head of its private share business.
In addition to the fine and censure, the firm agreed to adopt and implement policies, procedures, and systems to address the violations.
To learn more about the firm’s investigation of National Securities Corp, please see:
Pre-IPO Speculation is Risky
FINRA warns consumers in an Investor Alert that offerings of securities must either be registered with the SEC or meet an exemption under the federal securities laws—otherwise the offering is not legal.
“Pre-IPO” speculation involves buying unregistered shares in a private company before the initial public offering of securities—”and it can range from risky deals to outright frauds.” (To learn more please see: Investor Alert: Pre-IPO Speculation Scams.)
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