Jason L. Reid of New York, NY, a registered representative with Halcyon Cabot Partners, Ltd., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any and all capacities after consenting to findings that he sold securities by means of false and misleading information; acted as a principal and engaged in investment banking and securities business without proper registration; and willfully failed to report information on his Form U4. Letter of Acceptance, Waiver and Consent, No. 20140421221-01 (Nov. 9, 2015).
According to the AWC, in 2011, while Reid was associated with Halcyon, he had performed investment banking and other types of services for a private company. The AWC stated that as part of the investment banking agreement with Halcyon, the company would pay Halcyon a $10,000 retainer and 6.5% of all funds raised via securities sales. The company had claimed it could provide medical smart cards designed to reduce Medicare and Medicaid fraud by tracking medications, usage for pharmacies, patients, clinics, and doctors. Reid had reportedly been appointed by the company’s board of directors in January 2012, where he would become chief executive officer.
The AWC stated that during the due diligence period in 2011, Reid had obtained information which raised red flags concerning the company and its management. Specifically, the company’s founder, KL, had been enjoined by the New Jersey Superior Court from making materially and misleading statements concerning business prospects associated with a predecessor to the company, while also being enjoined from taking part in unregistered securities sales. Further, the AWC stated that the company was without regular salaried employees to operate its business, had no formal agreements with service providers, never generated revenue, did not own the technology that its smart card product was based upon, and had not finalized any agreement for the use of technology with a foreign company which owned it. FINRA found that KL had made other assurances in 2011 concerning the company that Reid should not have relied upon.
The AWC indicated that Reid’s work for the company included creating offering documents and using them to solicit investors in two private offerings known as the “seed” and “discount” rounds. FINRA found that such documents had failed to discuss the material risks posed by the investment in the company, while also containing misleading and false statements concerning the company’s future business prospects. In one case, the offering document stated that the company had a signed contract for use of the smart card in Medicare and Medicaid programs in New York. The AWC noted that the company had raised $1,300,000 in the two offerings.
FINRA found that Reid knew or should have known that the aforementioned offering documents contained materially false and misleading information and failed to discuss material facts. Reid’s conduct was found to be violative of Section 17(a)(2) of the Securities Act of 1933 and FINRA Rule 2010. FINRA also found that Reid’s engagement in the investment banking business prior to him being registered, where he acted as principal without registration and engaged in sales activity, amounted to violations of NASD Rules 1021 and 1030 and FINRA Rule 2010.
Firms and individuals, quite obviously, are prohibited from unauthorized use or borrowing of a customer’s funds or securities, forgery, non-disclosure or misstatement of material facts, and manipulations and various deceptions. These activities are also subject to the civil and criminal laws and sanctions of federal and state governments.
The Guiliano Law Group
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