The count of broker-dealers found guilty of misselling private placements of GPB Capital Holdings continues to rise. BD4RIA Inc., and Dempsey Lord Smith, have been fined by the Financial Industry Regulatory Authority (FINRA) for the same. Actions covered by the ruling pertaining to the spring of 2018. FINRA held that the two broker-dealers were negligent in their failure to inform clients that a deadline for filing financial information and issuing audited financial statements had been missed by the company.
Clients who had bought the security, and financial advisors, at that time, had been waiting for the filing of the financial statements with the Securities and Exchange Commissions (SEC) by GPB for two of its funds, which were also amongst its largest, despite the timelines for filing such information having already been violated by almost a year.
Investors are encouraged to call 1-800-856-3352 to receive their free “GPB Capital Investors Guide.” The guide helps investors understand the investigations and options to recover investment losses.
After missing this deadline, its financial struggles soon started becoming evident, with dividends being cut for some of the private placements. Last year, the company was charged with fraud by the SEC.
Dempsey Lord Smith (DLS)
DLS was found to have ‘negligently omitted’ sharing material information in May/ June of 2018 when it failed to inform four investors about GPB’s failure to file the required returns in time with the SEC. Between September 2015 and June 2018, several brokers, out of its complement of about a hundred brokers and financial advisors, seemed to have made unsuitable recommendations pushing the sale of securities of GPB to four investors.
FINRA levied a fine of $70K on DLS apart from restitution amounting to $30K, plus interest. Joel Beck, the firm’s attorney, did not comment on the ruling.
BD4RIA has a strength of 13 advisors and brokers. It was found to have ‘negligently omitted’ informing seven customers who had invested in GPB placements, about the company’s failure to file returns in time.
IN addition to restitution amounting to $40K, the firm was fined $45K by FINRA. Matthew Henneman, their attorney, did not respond to calls requesting for comments.
GPB Securities sales and FINRA actions
New York-based GPB Capital is an alternative asset management company that was created in 2013. Its business served as the general partner for limited partnerships formed to acquire companies that produced income. These included trash businesses as well as auto dealerships. A total of $1.8 billion was raised by GPB.
The sale of private placements of GPB Holdings was pushed aggressively by many broker-dealers and their representatives, perhaps lured by the industry-leading commissions of 7 to 10% available as sales commissions and fees, throwing caution, as well as established norms of prudence, to the winds.
FINRA’s actions against these firms have been gathering momentum. Geneos Wealth Management recently agreed to a $400K settlement that pertained to the sale of GPB Holdings securities as well as those of another alternative investment, the LJM Preservation & Growth Fund.