The Financial Industry Regulatory Authority Inc. on Friday barred the owner of a small independent broker-dealer after he testified falsely during an on-the-record interview and provided fabricated documents relating to his firm's branch office inspections, according to a Finra hearing panel decision.
Frank H. Black and his firm, Southeast Investments N.C. Inc., also failed to retain business-related emails and failed to establish and maintain, as well as enforce, supervisory systems and procedures to achieve compliance with applicable securities laws, according to the Finra panel's decision.
Southeast Investments N.C. posted $8 million in revenues and a net loss of $168,500 in 2015, according to a filing with the Securities and Exchange Commission. The Charlotte, N.C.-based firm, which Mr. Black opened in 1997, has close to 130 registered reps, according to Finra. Forty percent of the firm's revenues are from sale of variable annuities; 40% from mutual funds; and most of the remaining 20% from real estate investment trusts, according to the Finra panel.
Mr. Black said he had no comment about the Finra panels decision to bar him from the industry. According to the Finra hearing panel decision, Mr. Black and Southeast Investments denied the allegations.
In September 2012, Finra staff asked Mr. Black for records documenting Southeast Investments' branch office inspections, according to the decision. He produced a three-page inspections calendar, listing 43 branch offices Mr. Black claimed he inspected between March 2010 and August 2012.
Finra staff "found anomalies that undercut [Mr. Black's] credibility and the reliability of the documents he provided to evidence his purported branch office inspections," according to the decision. Four former Southeast Investments' brokers testified that neither Mr. Black nor anyone from the firm ever conducted an inspection of their branch offices.
Mr. Black, who said he drove long distances and through the night to do the branch exams, claimed that each of the brokers falsely testified at the hearing because they carried a grudge or some ill will against him as a result of being discharged by Southeast Investments, according to the decision. He disputed the brokers' testimony and insisted he had conducted the branch inspections, according to Finra.