Harold Lee Connell of Miami Florida the owner and chief executive officer of CP Capital Securities has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Connell (1) made omissions and misrepresentations to customers (2) sold unsuitable investments and (3) failed to supervise the firm’s business operations. Letter of Acceptance Waiver and Consent No. 2016051493702 (June 12, 2018).
According to the AWC, between January of 2013 and April of 2017, $4,500,000.00 had been accumulated by Connell and other firm representatives for three unregistered Regulation D offerings: CP US Income, CP Capital Venture LLC and CP Capital Venture II LLC. Evidently, the firm served as the placement agent for the fund accumulations, and those funds had been accumulated by two of the firm’s registered representatives.
Evidently, Connell took part in the private placement memorandum drafting for all of the offerings in question. He also served on an investment committee which determined the intended recipient of funds and provided authorization for funds to be distributed. The AWC further detailed that Connell was primarily responsible for the offerings. Yet, FINRA revealed that the customers funds had not been invested according to the manner described by the private placement memorandum.
Particularly, the AWC stated that the private placement memorandums for the first two offerings revealed that the funds would be diversified – but they were not diversified. In May of 2014, eighty-five percent of the funds for CP US Income had been placed with a speculative penny stock company. Additionally, most of the CP Venture I funds had been transferred elsewhere and then placed into CP Securities so that the firm’s expenses and Latin American expansion plans could be set in motion.
Moreover, the third offering’s private placement memorandum stated that funds may possibly be invested in affiliated companies and otherwise diversified; however, investors were not informed in the private placement memorandum that those affiliates had serious debt obligations pertaining to the second offering. The AWC also stated that the funds had not been diversified as the private placement memorandum revealed. Evidently, investors’ funds were directed to CP Group and the firm so that debt issues could be serviced and prior investors compensated. FINRA found that Connell’s conduct throughout this period was violative of FINRA Rules 2010, 2020, Securities and Exchange Act of 1934 Section 10(b) and Rule 10b-5.
The AWC further stated that nineteen customers invested a total of $4,505,000.00 in the three offerings. FINRA concluded that the offering was not suitable because no reasonable due diligence had been conducted concerning the product. FINRA also stated that the offering was not appropriate because of the lack of diversity. Moreover, FINRA found that the second and third offerings were not appropriate for investors because of the dire financial condition of the entities and failure of the firm to secure assets for repayment to customers. Those offerings also failed to be diversified. FINRA found that Connell’s conduct was violative of FINRA Rules 2010 and 2111.
The AWC stated that Connell also failed to adequately supervise registered representatives AL and JR in regard to the offerings. Evidently, Connell failed to ensure that he understood the transactions that had been effected by AL and JR, and enabled JR to hold himself out as someone with credentials that JR did not possess. FINRA found Connell’s supervisory failures in that regard to be violative of FINRA Rules 2010, 3110 and NASD Rule 3010.
FINRA Public Disclosure confirms that Connell is referenced in a customer initiated investment related complaint in which the customer requested $1,458,000.00 in damages based upon accusations of undue investment losses. Civil Action No. 2016-024809-CA-01 (Oct. 24, 2016).
CP Capital Securities was expelled by FINRA on July 31, 2017.
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