The Financial Industry Regulatory Authority Inc. this week censured and fined a Los Angeles-based investment bank and broker-dealer, WestPark Capital Inc., $250,000 after it made material misrepresentations to clients in documents when selling promissory notes issued by its parent company.
WestPark is a small firm with 60 registered reps in eight branch offices, according to the Finra settlement, which was issued Monday. The firm is owned by WestPark Capital Financial Services, and the promissory notes in question were sold from January 2012 to January 2018 to 21 customers and raised $3.9 million, according to the regulator.
WestPark Capital agreed to the settlement without admitting or denying Finra's findings. Finra also fined the firm's CEO, Richard Rappaport, $30,000, and suspended him four months from the securities industry in the matter.
A WestPark Capital spokesperson did not return calls Wednesday morning to comment.
Small broker-dealers from time to time sell stock or try to raise money from sales of private placements or promissory notes. Regulators may keep a close eye on such dealings due to the opaque and closed nature of such transactions.
The firm's information in the sale of the notes was faulty, according to Finra. WestPark provided investors with offering documents for the notes, which were approved by Rappaport, that contained material misrepresentations and omitted material facts, according to Finra.
For example, the offering documents stated that the parent company had a $1 million line of credit with a bank and that it was not in default on any "agreement or instrument material to its business," according to Finra.
However, the offering documents failed to disclose that WestPark Capital Financial Services had defaulted on the line of credit and had defaulted on successive forbearance agreements with the bank, or that the bank had sued the firm and Rappaport.
The offering documents for the notes also failed to disclose the parent company had net operating losses each year from 2012 through 2016, according to Finra.
WestPark and Rappaport also failed to reasonably supervise the registered reps soliciting investments in the private notes, according to Finra, and also more recently to comply with Finra's Taping Rule, which requires firms to record and review conversations between reps and clients.
Investors bet on AI-driven portfolio automation as advisory firms grapple with time-consuming manual work and rising demand for personalization.
Michael C. Graham passed away in November. He was 53.
The proposed changes around retail communications and certain representations of projected performance or targeted returns have tangible implications for B-D firms' compliance policies and procedures.
The independent wealth firm's latest move in Massachusetts a dedicated non-advisory platform for ultra-wealthy families as RIA family office spinoffs keep multiplying.
Savant Wealth Management's tax subsidiary is taking a new name and two new partners as the RIA continues layering accounting services onto its wealth platform.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
