FINRA brought Disciplinary Proceeding No. 2011025851501 against KCD and alleged two separate causes of action. The First Cause of Action charged that KCD violated NASD Rule 2210 through false and misleading advertisements for CDs. The hearing officer found the advertisements false and misleading in two material ways: 1) no FDIC-insured CDs existed at the advertised rate of return; and 2) the representatives used the advertisements as a marketing tool to entice potential customers into their offices in order to sell securities and other financial products to them. The evidence at hearing showed that some of the customers who were enticed by the CD advertisements also purchased securities from KCD.
The Second Cause of Action charged that KCD violated NASD Rule 3010 and FINRA Rule 2010, by failing to supervise appropriately the activities of KCD’s registered representatives at a Dallas, Texas office. Specifically, the agents offered and sold unregistered securities that were not exempt from registration. The hearing office found that Rule 506 of Regulation D of the Securities and Exchange Commission (“SEC”) did not apply because KCD’s representatives published articles (and published them on the website) for at least six months. As a result, the hearing officer concluded the articles constituted a general solicitation to the public for which the exemption did not apply.
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 lost money investing in CDs or unregistered securities through KCD, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.