Reef Securities (formerly known as Western American Securities Corporation) an oil and gas broker-dealer headquartered in Richardson Texas has been censured and fined $40,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm provided investment related documentation to customers that was comprised of unwarranted and misleading claims. Letter of Acceptance Waiver and Consent No. 2015043469001 (Apr. 11, 2018).
According to the AWC, starting in February of 2015, Reef Securities became the broker-dealer responsible for effecting sales of Offering M – a real estate investment trust – to customers of Reef Securities. Apparently, between February of 2015 and May of 2016, information had been distributed by Reef to investors concerning Offering M, which included an e-mail, website, online video and two-page overview. FINRA concluded that those communications did not contain a balanced assessment of Offering M, failed to provide an adequate foundation for which the investments could be evaluated, contained claims that were unwarranted and misleading, and projected investor profits.
Particularly, the AWC stated that Reef Securities did not reasonably detail the risks pertaining to the investments. Particularly, those communications failed to adequately discuss principal risk, lack of liquidity, a limited history of operations, and absence of any guarantees pertaining to distributions and returns. FINRA found that the firm’s conduct in that regard was violative of FINRA Rule 2210(d)(1)(A).
Moreover, the AWC revealed that the communications consisted of statements which were not consistent. In one communication, three-year profits were reportedly represented as ranging between thirty-five to forty-five percent, while in another communication, the three-year profits were represented as ranging between forty-five and seventy-five percent. Further, FINRA found that the firm projected profits in a manner which was prohibited. In one of the firm’s communications, the company represented that it anticipated profits to be as high as seventy-five percent. Consequently, FINRA found the firm’s conduct violative of FINRA Rule 2210(d)(1)(B), FINRA Rule 2210(d)(1)(F) and FINRA Rule 2010.
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