Bruce William McNabb, of San Antonio, Texas, a stockbroker with Merrill Lynch, Pierce, Fenner & Smith, Inc., was fined $50,000.00 and suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity after consenting to findings that he engaged in an unauthorized private securities transaction. Letter of Acceptance, Waiver and Consent, No. 20140413337-01 (Apr. 13, 2016).
According to the AWC, in December 2013, McNabb was contacted by an individual, RV, to discuss an investment opportunity in a company, AU Corp. Apparently, RV indicated that another individual, SP, and RV were considering getting involved in AU Corp.’s restructuring, as the corporation was, at the time, subject to Chapter 11 bankruptcy proceedings.
The AWC indicated that McNabb reached out to a Merrill Lynch customer, JH, as well as GS, a customer of Merrill Lynch’s affiliate company, where such individuals became informed by McNabb of the AU Corp. restructuring plan. Subsequent to generating interest in AU Corp., McNabb was asked by GS, JH, as well as RV, to engage in negotiations with SP and OCP (SP’s company) in pursuit of the opportunity.
According to the AWC, McNabb took action in January 2014, where he informed OCP of the investors’ plan to participate in the restructuring and capitalization of AU Corp. by making a collective $4,000,000.00 investment in return for AU Corp. shares. McNabb apparently indicated to OCP that management services would also be part of the deal to help AU. Corp. recover from the bankruptcy.
The AWC indicated that an entity, RPG, was ultimately formed on January 22, 2014, for investment in AU Corp. In connection with a term sheet that RPG executed, McNabb would serve as AU Corp.’s chief financial officer and board member. McNabb reportedly engaged in significant negotiations in furtherance of the deal with AU Corp. personnel.
The AWC further stated that AU Corp.’s plan for reorganization was submitted and approved with the federal bankruptcy court on April 28, 2014. The AWC indicated that stock was ultimately purchased on May 13, 2014, by RPG along with another investment fund, EWLP.
In connection with deal, McNabb became chief financial officer, treasurer, and secretary of AU. Corp., and became a board member on May 13, 2014. Subsequently, as the AWC stated, equity securities were provided to McNabb in connection with his efforts. McNabb also apparently received a stake in the successor entity to AU. Corp. Public disclosure records reveal that Merrill Lynch terminated McNabb on April 16, 2014, per allegations of his failure to disclose the aforementioned business activities.
FINRA, according to the AWC, claimed that McNabb never informed Merrill Lynch about his aforementioned involvement AU Corp. business. Merrill Lynch apparently never approved of McNabb’s participation in the AU Corp. transaction. FINRA ultimately found that McNabb violated FINRA Rule 2010 and NASD Rule 3040 as a result of engaging in the aforementioned private securities transaction.
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