Dempsey Lord Smith, a securities broker dealer headquartered in Rome, Georgia, has been censured and fined $70,000.00 by Financial Industry Regulatory Authority (FINRA) supported by findings that it made unsuitable investment recommendations and failed to tell investors adverse information about GPB Capital Holdings LLC. Letter of Acceptance, Waiver, and Consent No. 2019061213901 (March 21, 2022).
According to the AWC, between May 4, 2018, and June 29, 2018, four limited partnership interests in GPB Automotive Portfolio had been sold to customers without Dempsey Lord Smith ensuring that the investors knew about GPB’s failure to file financial statements with Securities and Exchange Commission (SEC). The AWC states that negligent omissions of this type showed that Dempsey Lord Smith violated FINRA Rule 2010.
In May-June 2018, Investors purchased a collective $323,000.00 in GPB Automotive Portfolio through the securities broker dealer. The regulator notes that in February 2021, SEC charged GPB Capital with fraud in violation of Securities and Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5. The lawsuit comes after a former partner accused GPB Capital of falsifying financial statements to hide that GPB Capital was committing fraud. Department of Justice has also brought wire fraud, mail fraud, and securities fraud charges against the founder and two GPB executives.
FINRA states that in September 2015, the first customer invested $100,000.0 in GPB Cold Storage LP. This caused the customer’s account to have more than 20 percent invested in alternative investments, contrary to Dempsey Lord Smith’s concentration guidelines. That customer was least interested in speculation and was not an accredited investor (a requirement to invest in GPB Cold Storage).
In June of 2016, the second customer invested $50,000.00 in GPB NYC Development. That customer was also not accredited. FINRA states that the customer had no prior experience investing in limited partnerships.
The third customer (a married couple) invested $50,000.00 in GPB Waste Management in 2017. Their accounts contained more than the firm’s allowable concentration limits for alternative investments. And the fourth customer, who invested $100,000.00 in GPB Automotive Portfolio LP in 2018, was not qualified as an accredited investor and had only a moderate risk tolerance.
The securities broker dealer earned commissions for selling GPB Capital securities. FINRA states that Dempsey Lord Smith violated FINRA Rules 2010 and 2111 for unsuitable GPB securities sales.
