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FINRA fines 4 Advisor Group firms over failures in disclosing information to investors

On Behalf of | Dec 16, 2022 | Regulatory Investigations

Four Advisor-Group broker-dealers have been penalized by regulators for not disclosing certain information to investors, according to a report by Financial Advisor.

The Financial Industry Regulatory Authority announced the sanctions against FSC Securities, Royal Alliance, SagePoint Financial and Woodbury Financial for violations that occurred in 2018. According to FINRA, the firms negligently failed to tell investors in an offering related to GPB Capital Holdings, LLC (GPB Capital) that the issuer failed to timely make required filings with the Securities and Exchange Commission, including filing audited financial statements. The broker-dealers were found to be in violation of FINRA Rule 2010, requiring members to observe high standards of commercial honor and just and equitable principles of trade.

FINRA’s letter of acceptance, waiver and consent notes that GPB Capital launched several limited partnerships from 2013 through 2018 that focused on acquiring controlling interests in certain private sector companies. The companies included GPB Automotive Portfolio, a firm created to acquire and operate auto dealerships which raised over $600 million from investors.

Automotive Portfolio was required to file audited financial statements by April 30, 2018. But in a letter to individuals, including the four Advisor Group firms, GPB Capital said the statements would be delayed pending completion of an audit. Despite being aware of the delays, FINRA said the four broker-dealers sold limited partnership interests in Automotive Portfolio after the announcement. The authority said the firms did not inform the customers that Automotive Portfolio had not timely filed the audited financial statements with the SEC or the reasons for the delay, thus “negligently omitting material facts.”

The companies did not admit or deny the findings but did agree to pay fines totaling $200,000 and restitution in the amount of nearly $1.1 million, along with being censured.

The attorneys at Lewitas Hyman were formally senior attorneys in the SEC’s Division of Enforcement. We have represented clients in regulatory matters while working at Morgan Stanley and in private practice at some of the world’s largest law firms. Therefore, we understand the complexities that come with being the subject of a regulatory inquiry, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a free consultation.