CIM Securities LLC, a securities broker dealer headquartered in Centennial, Colorado, has been censured and fined $35,000.00 by Financial Industry Regulatory Authority (FINRA) founded on findings that CIM Securities failed to supervise suitability requirements for private placement transactions. Letter of Acceptance, Waiver, and Consent No. 2019060957101 (January 31, 2022).
According to the AWC, from September 1, 2018, to February 23, 2020, the written supervisory procedures of CIM Securities required each subscription agreement for a purchase of privately placed securities to be reviewed by a supervisor for suitability, and for the supervisor to sign as evidence of conducting a review. These reviews required the securities broker dealer to take proper steps to get each investor’s suitability information, including risk tolerance, liquidity needs, time horizon, and investment experience.
FINRA states that throughout the 2018 to 2020 timeframe, forty-six customers were sold investments in high-risk private placement offerings. Those private placement offerings were only appropriate for people who could bear the risk of losing their principal and who were not seeking any liquidity with funds invested in the products. The AWC states that CIM Securities did not obtain suitability information on eight investors, precluding the securities broker dealer from knowing those investors’ risk tolerance and liquidity concerns. The eight investors collectively placed $680,000.00 in the private placement offerings.
FINRA states that seventeen total customers collectively invested $1,300,000.00 in the private placement offerings. But the investments were potentially unsuitable for them, according to the AWC. FINRA notes that ten customers had no more than moderate risk tolerances. Liquidity was important for at least six of the customers. Thirteen customers indicated that their investment horizon was limited.
FINRA states that CIM Securities’ failure to create and maintain an adequate supervisory system posed risks to those customers who were advised to invest in the high-risk products. The AWC states that CIM Securities violated FINRA Rules 2010 and 3110(a) and (b) for failing to supervise. The securities broker dealer also violated FINRA Rules 2010, 3110(b) and 4512(a)(1)(D) for failing to have a supervisor sign off on forty-nine accounts held by investors in private placements.
