CIM Securities LLC (also known as Brookline Capital Markets) a brokerage firm headquartered in Centennial Colorado has been censured and fined $15,000.00 by Financial Industry Regulatory Authority (FINRA) based upon the firm’s consent to findings that its failed to supervise three registered representatives’ private securities transactions. Letter of Acceptance Waiver and Consent No. 2017052070001 . (Oct. 3, 2018).
According to the AWC, in May of 2016, the firm authorized three of its registered representatives to engage in outside business activities. Respondent failed to comply with its obligations to review, approve, document, and supervise approximately $2.5 million in private securities transactions by three of its registered representatives as required by FINRA Rule 3280(c) and its own written supervisory procedures.
In particular, the AWC stated that a limited liability corporation had been formed by the three representatives so that they could sell membership interests in the LLC to investors. The representatives evidently sought to pool investor funds so that investments could be made in an offering under which CIM Securities LLC was the placement agent.
Apparently, investors were advised by the three representatives to purchase the LLC membership interests.
As a result, a total of $2,5000,000.00 worth of membership interests had been purchased by the investors.
Evidently, commissions had been paid by CIM Securities LLC to the registered representatives as a result of their sales efforts. The AWC stated that CIM Securities also knew that the representatives would potentially earn additional compensation by way of future profits, expense reimbursements, and an ownership stake in the LLC that the representatives established.
FINRA stated that the written procedures utilized by the firm mandated that the three registered representatives’ securities transactions be supervised by the firm as if the firm was the one effecting those securities transactions. In addition, the procedures used by the firm called for a suitability review of any of the transactions recommended by registered representatives to non-institutional customers.
Further, the procedures stated that the transactions had to be placed on the firm’s records and books so that the firm could make sure that the registered representatives’ securities transactions executed away from the firm complied with FINRA rules and federal securities laws.
Nevertheless, the firm neglected to supervise the transactions executed by the three registered representatives. In addition, the firm never placed the transactions on the firm’s records and books. FINRA found the firm’s supervisory failures in this regard to be violative of FINRA Rule 2010, 3110(b), and 3280(c).
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