The Financial Industry Regulatory Authority said Tuesday that it sanctioned eight firms and 10 individuals and ordered restitution of more than $3.2 million for sales of private placements, including some issued by Provident Royalties and Medical Capital Holdings.
FINRA ordered Next Financial, for instance, to pay $2 million in restitution to affected customers and fined the firm $50,000, In addition, Steven Lynn Nelson, the firm’s vice president for investment products and services was suspended for six months and fined $10,000.
Securities America was censured and fined $250,000 in connection with the sale of two Provident Royalties private placements.
The latest action follows FINRA’s sanctioning of two firms and seven individuals in April 2011 for selling interests in private placements without conducting a reasonable investigation.
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“FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers,” said Brad Bennett, FINRA executive vice president and chief of enforcement, in a press release. “These actions reinforce that any firm or individual who fails to conduct reasonable investigations of these offerings, especially in light of multiple red flags, will not be allowed to shift all the responsibility to the issuers of the fraudulent private placements.”
The legal costs and related issues associated with private placements plagued Securities America for much of 2011 and prompted its sale by Ameriprise Financial (AMP) to Ladenburg Thalmann for an initial price of about $150 million.
In terms of the latest FINRA matter, Securities America said (in a statement), “We are pleased to have put this matter behind us.” (Next Financial did not return a call requesting a statement by press time.)
As part of the deal, which was announced in August, Ameriprise agreed to indemnify Ladenburg for losses related to claims pending from the sale of certain securities issued by Provident Royalties and Medical Capital Holdings. These sales prompted Ameriprise to take a $77 million charge in the first quarter and put Securities America up for sale in April.