Securities Lawyers Blog
According to BrokerCheck records the CEO and Chief Compliance Officer of Firm Financial West, Gene Valentine (Valentine) has been subject to one customer complaint, three tax liens, and one regulatory action. According to records kept by The Financial Industry Regulatory Authority (FINRA) Valentine has been accused by FINRA of failing to have supervisory procedures for due diligence on private placement offerings.
FINRA alleged that from October 1, 2008, through June 30, 2015, Financial West’s written supervisory procedures failed to address the firm’s due diligence process for private placements. FINRA found that Financial West’s written supervisory procedures did not describe the process for approving private placement offerings and did not describe how or when to evaluate private placement offerings. FINRA also found that the firm failed to consistently follow the written procedures that did exist such as failing to document the review as described in the procedures.
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.” In this case, FINRA found that Financial West failed to meet these requirements.