Sanctuary Securities Fined by FINRA Over GPB Capital Sales (David A. Noyes & Company)

Sanctuary Securities Fined For GPB Capital Sales

Sanctuary Securities Inc. is the latest casualty of the irregularities over the private placement sale of offerings sponsored by GPB Capital. As per the letter of settlement made available by the self-regulating organization (SRO), it has been fined $60K by the Financial Industry Regulatory Authority (FINRA) for the sale of GPB Holdings II LP and GPB Automotive Portfolio LP. This consists of partial restitution and interest. A censure has also been agreed to by Sanctuary.

Founded in December 1939, David A. Noyes & Company underwent a change of name to Sanctuary Securities Inc. in March 2020, pursuant to a change in the control and management of the firm. It has 57 branch offices it operates from, with the help of around 270 registered representatives. As an introducing broker-dealer, its business includes selling private placements and equity securities, apart from other securities businesses of a general nature.

For more information about GPB Capital’s investment recovery options and investigation, investors should call 1-800-856-3352.

A brief history of GPB Capital

Based in New York, GPB Capital is an alternative asset management firm. It was founded in 2013 to conduct the business of sponsoring Regulation D private placement investment funds. It raised around $1.8 billion from investors.

Created in 2015, investing in the sectors of retail, automotive, and managed information technology was the primary business of GPB Holdings 1, while for GPB Automotive, created in 2013, it was an automotive dealership investment.

Along with its senior executives, GPB was charged by the SEC and the Justice Department last year with running a ‘Ponzi-like scheme’ for defrauding investors.

A lawsuit had been filed by GPB in 2017 against a former operating partner for his failure to acquire an interest in some automotive dealerships. The lawsuit had triggered a slew of counterclaims made by the former partner, among them the falsification of financial statements with an intent to conceal fraud. Though the litigation is pending, GPB Capital has denied the allegations.

Brokers-dealers empaneled for selling its products were notified by GPB Capital of their desire to register with the SEC certain classes of securities issued by its limited partnerships and the initiation of the process for the same. The notification also stated that the requirement of filing audited financial statements, a part of that process, would be delayed until the completion of a forensic audit, then apparently going on.

Its auditors having “determined that it would be prudent to hire a third-party firm to complete a forensic audit in order to endeavor to put [the former partner’s] counterclaims and other allegations to rest” was a disclosure made by GPB.

Conflicts of interest

The SEC has opened an investigation into investment firm GPB Capital Holdings because of alleged conflicts of interest among its owners. The SEC alleges that Gentile, Schneider, and Ascendant Capital failed to disclose conflicts of interest, failed to disclose investments, and failed to register securities.

As a result, a civil suit has been filed against GPB. A former NASD Regulation/FINRA examiner has been accused of misconduct in her role as an investor at GPB Capital Holdings. She alleges that she had a conflict of interest in the company’s activities and was pressured by the company’s management to overlook the problems. However, she was fired after refusing to go along with the pressure and reported the situation to FINRA and the U.S. Securities and Exchange Commission.

Investors and regulators have turned their attention to GPB Capital Holdings after it failed to file certain registration documents and make critical financial disclosures to the Securities and Exchange Commission. Although the company has maintained that it is performing an audit of its assets, it has not made any investor distributions for more than a year. In November, GPB disclosed that Crowe LLP, the firm that had audited it, had resigned.

This case arose after GPB Capital failed to purchase interests in an automotive dealership from a former operating partner. The former partner asserted a number of counterclaims against GPB Capital, including allegations that the company falsified financial statements. The company denied the allegations.

Auditor resignation

GPB Capital Holdings has been embroiled in a series of legal disputes in recent months. Last November, the company informed its investors that its audit deadline would be delayed. The firm is also under investigation by the FBI and the SEC. In October, the company’s CCO was charged with obstruction of justice.

As a result, GPB has suspended its auditing work, which was due to conclude at year-end. In addition, GPB’s auditor, Crowe LLP, has resigned. The company cites internal investigations and other matters as reasons for the resignation. However, this change in an accounting firms is perceived as a red flag by many investors.

FINRA allegations and actions

According to FINRA, however, GPB failed to update the offer documents in time and reflect the delay in their statutory filings.

FINRA found Sanctuary negligent in not keeping eight investors informed about GPB’s failure to make regulatory filings, including audited financial statements, with the Securities Exchange Commission (SEC) in a timely manner.  These eight sales amounted to a total of $600K, were made between the 8th of June and 29th of June, 2018, and were split equally, four each, between GPB Holdings II and in GPB Automotive. A total of $48K was earned by the broker-dealer in commissions for its efforts.

It has been FINRA’s claim that Sanctuary continued to sell these private placement offerings after they had received the communication from GPB.

BD4RIA Inc., Dempsey Lord Smith LLC, Geneos, IBN Financial Services, National Securities Corporation, United Planners, and Capital Investment Group are some of the other recent broker-dealers that have been penalized past by FINRA for similar allegations and conduct.

GPB Capital Holdings is under investigation for allegedly defrauding investors. Several regulatory agencies, including the U.S. Securities and Exchange Commission, the Massachusetts Secretary of State, and the Federal Bureau of Investigation, have initiated investigations into the company. Several executives have resigned and a number of affiliated broker-dealers have been investigated.

If you have suffered a loss in GPB Capital Holdings, you have several legal options. You can file a customer arbitration claim with the FINRA or a class action lawsuit if you believe that you were defrauded by GPB Capital Holdings.

For more information about GPB Capital’s investment recovery options and investigation, investors should call 1-800-856-3352.

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