Securities Lawyers Blog
According to BrokerCheck records Ross Sinclaire & Associates, LLC (Ross Sinclaire) has been subject to a regulatory action over, among other things, the firm’s sales practices with respect to several private placement offerings. According to records kept by The Financial Industry Regulatory Authority (FINRA) Ross Sinclaire has been accused by FINRA of failing to disclose material information to investors in relation to several offerings offerings.
FINRA alleged that in March and April 2014, Ross Sinclaire was the exclusive placement agent for a private placement of notes and was involved in the preparation and circulation of a Confidential Information Memorandum (CIM) to seven accredited investors for notes. The proceeds were to provide to a film production company for the advance funding of anticipated state tax credits. The CIM disclosed that in addition to a 2% commission, Ross Sinclaire would also earn a “certain percentage” of profits on the sale of tax credits but failed to disclose that it would earn half of those profits. FINRA found that this information was a material fact that would have been important to investors. FINRA also found that the CIM also failed to disclose that one of Ross Sinclaire’s registered representatives was Vice President or the issuer.
In another offering, FINRA alleged that between December 2015 and December 2016, Ross Sinclaire omitted material facts from the Private Placement Memorandum (PPM) for municipal bonds underwritten by the Firm to finance the construction of a community recreation center. FINRA found that Ross Sinclaire failed to disclose in the PPM: (i) that the issuer had threatened to default on an earlier series of bonds and bond anticipation notes (BANs); (ii) that a loan agreement existed between the issuer and Ross Sinclaire: and (iii) information about the finances of both the issuer and Ross Sinclaire. FINRA determined that this information should have been included in the PPM as it would have been material to investors in deciding whether to invest in the bonds.
Under FINRA Regulatory Notice 10-22 firms are provided with detailed guidance while reminding them of their “obligation to conduct a reasonable investigation of the issuer and the securities they recommend” in private placement offerings. The notice also provides that a firm’s supervisory procedures must be reasonably designed to ensure that the firm engages in a rigorous due diligence process. In order to comply with FINRA’s rules and “[t]o demonstrate that it has performed a reasonable investigation, a [firm] should retain records documenting both the process and results of its investigation.”
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.
Investors who have suffered losses in private placement offerings are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.