Dawson James Securities Inc., a securities broker dealer headquartered in Boca Raton, Florida, has been censured and fined $500,000.00 by Financial Industry Regulatory Authority (FINRA) because the company and its CEO, Robert Dawson Keyser Jr., failed to preserve business-related text messages and failed to supervise certain representatives in connection with due diligence on private placements. Letter of Acceptance, Waiver, and Consent No. 2020065100701 (April 5, 2024).
According to the AWC, from August 2011 through January 2021, Dawson James did not maintain a supervisory system capable of ensuring compliance with the firm’s obligations to capture, preserve, and review over 10,900 business-related texts received or sent by stockbrokers and other individuals associated with the securities broker dealer. Over this period, there was communication through text that was not recorded or supervised, in violation of NASD Rules 3010 and 3110(a), as well as FINRA Rules 2010, 4511, and 3110.
The firm did not implement or enforce measures to either prevent this type of communication or to store it when permitted. According to the AWC, Keyser Jr. himself received or sent approximately 4,400 business-related text messages during a time when those communications were not allowed by the firm. Therefore, the firm violated Securities Exchange Act of 1934 and Rule 17a-4.
Between December 2016 and March 2019, Dawson James also failed to create and maintain a supervisory system that included reasonable written supervision procedures for conducting due diligence on private placement offerings. The securities broker dealer did not have specific protocols for reviewing the reasonableness of due diligence conducted by its investment bankers. This meant that there was no standardized method to ensure that all necessary aspects of the offerings were being evaluated.
The firm’s procedures failed to address how conflicts of interest should be managed when conducting due diligence. Dawson James also did not enforce requirements for its investment bankers to document their due diligence efforts. Therefore, Dawson James violated FINRA Rules 2010 and 3110.
