FINRA’s Department of Enforcement began an investigation and initiated Disciplinary Proceeding (No. 2014040295201) stemming from Carolina Financial’s private placement offerings of senior secured notes in a medical and dental supply company. According to FINRA, Carolina Financial, through Roberts, sold nearly $2.5 million of 13.5 percent Senior Secured Notes in a $5.0 million offering to 18 customers. The $5.0 million offering was part of a $150 million fraudulent scheme that was halted when the president of the medical and dental supply company was arrested and subsequently pled guilty to wire fraud.
FINRA’s allegations focus on Carolina Financial’s lack of due diligence and material representations with respect to the senior secured note offerings. According toe FINRA, Carolina Financial failed to conduct reasonable due diligence in connection with this offering, as well as provided potential investors with sales literature that misrepresented, inter alia: 1) the security of the investment; 2) the financial condition of the issuer; 3) the value of the issuer’s largest; and 4) failed to disclose risks, investment fees and expenses.
Based upon the foregoing alleged misconduct, FINRA asserted Carolina Financial violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Exchange Act Rule 10b-5 thereunder, and FINRA Rules 2010 and 2020. With respect to FINRA’s allegations that Carolina Financial failed to reasonably perform adequate due diligence, FINRA alleges Carolina Financial violated FINRA Rules 2111(a) and 2010. With respect to FINRA’s allegations centering on Carolina Financial’s misrepresentations and omissions, FINRA brought claims for violation of FINRA Rules 2210(d)(1)(A), 2210(d), and 2010. Finally, FINRA alleges the firm and Roberts failed to enforce its supervisory procedures regarding due diligence and its required suitability determination, in violation of NASD Conduct Rules 3010(a) and 3010(b) and FINRA Rule 2010.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment losses investing in senior secured notes through Carolina Financial, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please complete the contact form or contact one of our attorneys at (800) 627-2179 to schedule a free consultation.