FINRA’s Department of Enforcement recently investigated Liberty Associates and determined it not establish, maintain and enforce a reasonable supervisory system, including written supervisory procedures to supervise private placement transactions. Specifically, the aforementioned private placement transactions were engaged in conducted by a former registered representative operating out of its Santa Fe, New Mexico branch office. FINRA alleged Liberty Associates failed to have written supervisory procedures, related to performing due diligence of private placement offerings and determining the accreditation status of the investors in those offerings.
As a result of the aforementioned misconduct, FINRA alleges Liberty Associates engaged in multiple violations of federal securities laws and industry rules and regulations, including Section 17(a) of the Securities Exchange Act of 1934 Exchange; SEC Rule 17a-4 promulgated thereunder, NASD Rules 3010(a) and (b) and 3110 and FINRA Rules 4511 and 2010. Specifically, under NASD Rule 3010, a brokerage firm owes a duty to all of its clients to monitor and supervise its employees properly. The rule states: “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…”
If a FINRA-member fails to supervise its employees or conduct proper due diligence on investment products, then the firm may be liable to the customer for damages or disciplined by FINRA, or both. Here, FINRA censured Liberty Associates and fined the Firm $3,500.
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 damages investing in private placements through Liberty Associates, 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.