FCG Advisors LLC, headquartered in Chatham, New Jersey, was censured and fined $50,000.00 by the Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm sold securities that were not registered. Letter of Acceptance, Waiver and Consent, No. 2012030676501 (June 28, 2016).
According to the AWC, from August 2011 through October 2011, the firm sold, on the behalf of three customers, an estimated total of 2,325,567 penny stock shares of a company, LT. Apparently, the three customers, AS, JK, and RD had received an estimated $632,205.00 as a result of selling the positions through the firm, while the firm gained $25,000.00 in commissions.
The AWC stated that no registration was effective pertaining to the aforementioned shares, and the firm did not have an exemption from registering the securities. FINRA further found that FCG failed to adequately investigate the nature of the acquisition by the customers and customers’ ultimate sale of the shares. FINRA also noted the firm’s failure to uncover whether an exemption existed for registration per Section 5 of the Securities Act of 1933. As such, FINRA found the firm’s conduct to be violative of FINRA Rule 2010 in this regard.
The AWC further stated that between March 2010 and December 2012, FCG had failed to create and adequately implement supervisory procedures and systems in order to ensure that the firm was complying with Section 5 of the Securities Act. Apparently, FCG did not sufficiently inquire into whether certain exemptions existed for securities that customers deposited in accounts in order to sell.
FINRA also found that FCG did not take proper supervisory steps to verify how customers actually obtained their shares, and merely depended on a clearing firm for purposes of identifying red flags concerning distributions of shares that were potentially unregistered. As such, FINRA found that the firm’s conduct to be violative of FINRA Rule 2010 and NASD Rule 3010.
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