The Financial Industry Regulatory Authority is still trying to procure documents from the CEO of a former FINRA funding portal member, DreamFunded Marketplace, which withdrew its registration with the Securities and Exchange Commission in 2017 and subsequently was “terminated” as a funding portal by FINRA.
In a Feb. 23 filing, FINRA’s enforcement division filed a complaint with the self-regulator’s Office of Hearing Officers, stating that Manuel Fernandez, DreamFunded’s former CEO, has repeatedly failed to provide timely and complete responses to requests for documents and information issued during FINRA’s investigation of the funding portal’s violations of crowdfunding rules.
The FINRA complaint states that DreamFunded violated “numerous SEC Regulation Crowdfunding Rules and FINRA Funding Portal Rules in connection with more than a dozen crowdfunding offerings.”
DreamFunded was headquartered in San Francisco and became a FINRA funding portal member in July 2016.
Through its online crowdfunding portal, DreamFunded acted as an intermediary in 15 crowdfunding offerings under the Securities Act of 1933.
The firm filed a Form CFPortal-W with the SEC to withdraw its registration on Oct. 4, 2017, and DreamFunded’s status as a FINRA funding portal member was terminated on Nov. 3, 2017.
Among the 10 violations that FINRA says the firm committed from July 2016 through October 2017 were making false, exaggerated, unwarranted, promissory or misleading claims to investors about offerings promoted through its online crowdfunding portal and about the portal itself, and that the firm did not deny access to its platform when it had reason to believe issuers or their offerings presented the potential for fraud or otherwise raised investor protection concerns.
While DreamFunded is no longer a FINRA funding portal member, it remains subject to FINRA’s jurisdiction because FINRA’s complaint was filed within two years after the effective date of termination of DreamFunded’s status as a FINRA funding portal member, because the misconduct was committed while it was a member, and because Fernandez failed to respond to a FINRA request for information during the two-year period after the date upon which it ceased being a member.
The complaint states that Fernandez, through one attorney, first stated he would not produce the requested documents but after retaining new counsel said he intended to respond.
Fernandez provided “limited” documents on Jan. 5 and Jan. 19, with the Jan. 19 submission including a doctor’s note stating that Fernandez was ill and unable to work between Jan.17 and Jan. 20.
FINRA staff granted DreamFunded and Fernandez yet another extension, until Jan. 29, to provide a complete response to the Rule 8210 request.
On Jan. 25, new counsel informed FINRA staff that he would no longer be representing DreamFunded or Fernandez.
The following day, Fernandez sent FINRA staff a second doctor’s note, this one dated Jan. 23, stating that Fernandez would be unable to resume a normal workload until Feb. 5, the complaint states.
“The note did not identify any illness that Fernandez was suffering from or otherwise specify the reason for his alleged inability to work,” FINRA said.
During the time period when Fernandez claimed he was incapacitated, the complaint states, “his social media posts indicate that he traveled out of town to enjoy, among other things, a film festival in Salt Lake City and a concert in Las Vegas.”
FINRA’s enforcement division asked for monetary sanctions.
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