Kirk Lynn Ferguson, of Salt Lake City, Utah, president and chief compliance officer of ACAP Financial, and Gary Hume, of Salt Lake City, Utah, compliance officer of ACAP Financial, have been sanctioned by Financial Industry Regulatory Authority (FINRA) according to an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that Ferguson and Hume effected unregistered securities sales. Department of Enforcement v. Ferguson, et al., No. 2012030459101 (Dec. 2016).
Particularly, Ferguson has been fined $25,000.00 and suspended for two years from associating with any FINRA member in any capacity based upon allegations that Ferguson effected sales of unregistered securities in violation of FINRA Rule 2010, maintained insufficient supervision procedures and protocols in violation of FINRA Rule 2010 and NASD Rule 3010, and failed to supervise Hume in violation of FINRA Rule 2010. Hume has been barred in all capacities from associating with any FINRA member based upon allegations that he effected unregistered securities sales in violation of FINRA Rule 2010.
According to the Order, from January of 2011 to December of 2013, ACAP Financial, by way of Ferguson, and Hume, effected the liquidation of 3,300,000,000 shares of four unregistered microcap stocks. The Order revealed that these microcap stocks had been deposited into the accounts of two ACAP clients.
The Order stated that the first client, VB, created accounts on behalf of two corporations and had been listed as the authorized contact person on the accounts. VB’s husband, JMB, was reportedly permitted by ACAP to control the accounts and instruct the firm to liquidate the unregistered securities. The firm apparently failed to detect that JMB was barred by Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD) from participating in penny stock offerings. JMB or VB had reportedly effected the liquidations of the penny stock shares after the deposits had been made. The Order stated that the proceeds had been transferred out of the clients’ accounts promptly after the liquidations.
Ferguson was cited by FINRA for failing to properly supervise sales of securities to ensure compliance with Securities Act of 1933 Section 5. Evidently, Ferguson did not create and enforce supervisory procedures and systems that were adequately designed to help staff concerning SEC registration requirements. FINRA found that the Ferguson’s conduct in this regard was violative of FINRA Rule 2010 as well as NASD Rule 3010.
The Order indicated that Ferguson failed to supervise Hume’s activities. Ferguson evidently failed to ensure that Hume conducted reasonable and independent due diligence regarding VB’s and JMB’s penny stock liquidations. The Order further stated that Ferguson did not reasonably analyze customer documents to determine if penny stock sales were unlawful. FINRA found that Ferguson’s conduct in this regard was violative of FINRA Rule 2010 and NASD Rule 3010.
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