The Financial Industry Regulatory Authority on Monday sanctioned eight brokerages and ten individuals, and ordered a total of $3.2 million in restitution for selling private placements that ultimately failed.
The Wall Street self-regulatory watchdog found that the brokerages did not have adequate supervisory systems in place to identify and understand the risks of the private placement offerings, according to a statement.
Brokerages named include NEXT Financial Group Inc in Houston, Texas; Investors Capital Corp of Lynnfield, Massachusetts; and Securities America in La Vista, Nevada.
A Securities America spokeswoman said in a statement that the firm is pleased to put the matter behind us.
Representatives from NEXT Financial Group and Investors Capital Corp did not immediately return calls for comment.
FINRA sanctioned the firms and numerous officers they employed for sales of private placements offered by Provident Royalties LLC, Medical Capital Holdings and DBSI Inc. The securities ultimately failed, causing significant investor losses. None of the companies or individuals involved admitted or denied the charges.
Private placements, often called Reg D offerings, are usually exempt from Securities and Exchange Commission registration because they are not intended for sale to the general public. Investors must typically meet certain net-worth and income requirements to be eligible to purchase private placements.
Securities America was a unit of Ameriprise Financial Inc until November 7, when it was acquired by Ladenburg Thalmann Financial Services Inc.
(Reporting by Suzanne Barlyn in New York, editing by Chelsea Emery)