Recent FINRA Disciplinary Fines And Sanctions

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Recent FINRA Disciplinary Fines And Sanctions

Arque Capital, Ltd. submitted a letter of acceptance, waiver, and consent in which the firm was censured and fined $50,000. Arque Capital did not admit or deny the findings but consented to the penalties and to the entry of findings that it sold about $3.53 million in an alternative investments called Renewable Secured Debentures to roughly forty investors while providing them with the company’s sales kit, which included a brochure with misleading statements. According to the findings, the firm was responsible for conducting due diligence on the company and the debentures as well as advertising pieces pertaining to the debentures. Arque Capital sent out solicitations with misleading statements, omitted material facts, and did not provide a sound basis for evaluating the securities that were being offered.

Joseph Brandon Westphal was banned from association with any member of FINRA in any capacity. The penalty was the result of findings that he did not respond to FINRA’s request for documents and information. According to the findings, FINRA had been looking into accusations from Westphal’s past member firm that he opened numerous accounts without approval, had stolen cash, and had engaged in serious ethical violations.

Steven Lee Stahler submitted an Offer of Settlement in which he was assessed a deferred fine of $15,000 and suspended from associating with any FINRA member in any capacity for six months. Stahler did not admit or deny the allegations but consented to the penalties and to the entry of findings that he made unsuitable suggestions to investors. According to the findings, Stahler unreasonably suggested that his investors put a significant amount of their portfolios and net worth in private placements and real estate investment trusts. Stahler received around $165,000 in net commissions on the investments he suggested to his clients. Stahler, according to the findings, also negligently misrepresented material facts relating to suggestions he made to three clients, telling them that their investments contained only moderate risk and that the offering documents exaggerated the risk.

WM. H. Murphy & Co., Inc. and William Herbert Murphy were named as respondents in a FINRA complaint claiming that the firm engaged in the sale of private placements that supposedly were being sold pursuant to the registration exemption provided by SEC Rule 506 of Regulation D. Accordingly, the offerings could not be sold through general solicitations or advertisements. The firm is alleged to have used radio shows and workshops to gain new clientele to whom the firm sold private placements in violating of the general solicitation prohibition. Accordingly, the private offerings did not comply with all of the conditions of the registration exemption and lost the Rule 506 exemption, causing the firm to participate in unregistered sales of $1,031,700 in securities to clients. The firm also allegedly failed to establish and maintain a supervisory system reasonably designed to ensure compliance with Section 5 of the Securities Act of 1933. The firm did not have adequate procedures to prevent the sale of unregistered and non-exempt securities.

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