Private Placement Fraud and Failure to Perform Reasonable Due Diligence FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Mark Mather Mercier (CRD #1884246, Registered Principal, Lutz, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any principal capacity for three months. The fine must be paid either immediately upon Mercier’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Mercier consented to the described sanctions and to the entry of findings that as his member firm’s CCO, he shared responsibility with the firm’s president for conducting due diligence for private placements in which the firm acted as a selling agent only because the firm did not have WSPs addressing due diligence for private placements where the firm acted as the selling agent only. The findings stated that Mercier signed selling agreements for offerings and, consistent with the terms of the agreements, his firm received fees and/or commissions for soliciting investors, which included a specific fee related to due diligence purportedly performed in connection with each offering. The findings also stated that Mercier did not perform any due diligence and did not seek or obtain due diligence reports for the offerings, which identified red flags with respect to the offerings. The findings also included that Mercier should have scrutinized each of the offerings given the high rates of return, but did not take the necessary steps to ensure that these rates of return were legitimate and not payable from proceeds of later offerings, in the manner of a Ponzi scheme. FINRA found that Mercier did not conduct meaningful due diligence for these offerings prior to approving them for sale to firm customers, and failed to have reasonable grounds for allowing firm representatives to continue selling the offerings despite the negative information an identified red flags. FINRA also found that Mercier, acting on his firm’s behalf, failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations with respect to the offerings.
The suspension is in effect from October 17, 2011, through January 16, 2012. (FINRA Case #2009019070901).