Finra smacks National Securities with Wells notice

National Securities Corp. is the latest broker-dealer to face disciplinary action from Finra over the sale of private placements gone bust.

According to National Securities’ profile on Finra’s BrokerCheck system, the firm received a Wells notice last month from the Financial Industry Regulatory Authority Inc. A Wells notice indicates that the regulator intends to bring an enforcement action against an individual or a firm.

National Securities representatives sold investors about $3.7 million of notes issued by Provident Royalties LLC, according to the latter’s bankruptcy court filings.

The Regulation D offering from Provident involved a series of oil and gas private placements that the Securities and Exchange Commission in 2009 claimed were fraudulent.

Mark Roth, the firm’s general counsel for National Holdings Corp., the parent of National Securities, declined to comment.

National Securities received the Wells notice regarding violations of product suitability rules, e-mail supervision rules, and standards of commercial honor and principles-of-trade rules, according to the BrokerCheck report. The product mentioned in the report was a “private placement.”

In a meeting of brokerage executives this month in Phoenix, James Shorris, executive vice president and executive director of enforcement with Finra, said that Reg D private placements and non-traded real estate investment trusts are listed as the first and second areas of focus for Finra, respectively.

Broker-dealers have begun to feel the pinch. Workman Securities Corp. this month reached an agreement with Finra to pay $700,000 for partial restitution to more than a dozen clients who had sued the firm over investments in Medical Capital Holdings Inc. and Provident Royalties (see story on Page 16). Like Provident, the SEC charged Medical Capital with fraud in 2009.

E-mail Bruce Kelly at [email protected].

Related Topics: Financial Industry Regulatory Authority