South Florida Arbitration & Litigation Lawyer Blog
FINRA Arbitration Private Placement and Variable Annuity Investment Fraud and Misrepresentation Attorney, Russell L. Forkey, Esq.
July, 2011:
Brookstone Securities, Inc. (CRD #13366, Lakeland, Florida) and David William Locy (CRD #4682865, Registered Principal, Overland Park, Kansas) submitted a Letter of Acceptance, Waiver and Consent in which the firm and Locy were censured and fined $25,000, jointly and severally. Without admitting or denying the findings, the firm and Locy consented to the described sanctions and to the entry of findings that the firm, acting through Locy, did not have WSPs addressing due diligence requirements for third-party placements. The findings stated that the firm, acting through Locy, failed to conduct an adequate due diligence of a third-party private placement offering before Locy approved the offering of shares to customers. The findings also stated that Locy’s due diligence efforts did not include any investigation into an equity fund, despite acknowledging that he knew very little about it or the third-party placement and could not get any solid information about the fund, including pending litigation or financial statements. The findings also included that Locy knew nothing about the fund that was not contained in a PPM the issuer prepared, but accepted that the firm representatives forming the offering had conducted due diligence and relied on their opinion of the fund. FINRA found that Locy acknowledged the representatives had limited, if any, experience forming a private placement. FINRA also found that firm representatives sold or participated in sales of shares to customers without notifying Locy or anyone else at the firm, which caused those sales to not be recorded on the firm’s books and records. (FINRA Case #2009019837303).