The Financial Industry Regulatory Authority Inc. fined another independent broker-dealer, the rep-owned United Planners' Financial Services of America, on Friday for negligent sales to clients of GPB Capital Holdings private placements in light of GPB’s failure in 2018 to issue audited financial statements for the high-risk, high-commission investments.
In the settlement, United Planners, with 560 registered reps and financial advisers, accepted Finra’s findings without admission or denial. The firm was fined $40,000 and agreed to pay restitution of $37,000, plus interest, to the four clients affected. Finra deemed the restitution "partial" because it only accounted for commissions the customers had paid.
The actions covered in the settlement date back to the spring of 2018; that’s when financial advisers and clients who had purchased GPB private placements were waiting for the company to file financial statements with the Securities and Exchange Commission for two of its largest funds, even though both funds had crossed industry thresholds for making such information public a year earlier.
After missing its deadline to file the audited financial statements, GPB struggled, cutting dividends for some private placements. Its founder David Gentile and other senior executives were charged with fraud last year by the Justice Department.
Brokers at the dozens of firms that sold GPB private placements routinely charged clients 7% to 10% commissions and fees on GPB products, the highest percentage allowed in the industry.
United Planners' Financial Services of America violated industry rules in May and June of 2018 when it “negligently omitted” to tell four investors in GPB private placements that the company had failed to make required filings in a timely manner with the SEC, including audited financial statements, according to Finra.
An attorney representing United Planners, Chad Weaver of Freeman Mathis & Gary, did not return a call Tuesday to comment.
Finra is gathering momentum on fining firms over sales of GPB securities in 2018. In March, Geneos Wealth Management Inc. agreed to a $400,000 settlement with Finra related to sales of GPB private placements and another alternative investment, the LJM Preservation & Growth Fund.
GPB Capital, a New York-based alternative asset management firm founded in 2013, served as the general partner for limited partnerships formed to acquire income-producing companies such as auto dealerships and trash businesses. GPB eventually raised $1.8 billion from investors. GPB has been selling assets, but it has not yet released clear plans for investors to get back money from that transaction.
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