Revere Securities LLC a brokerage firm headquartered in New York New York and Kurt Alfred Hurst (the firm’s branch manager) have been sanctioned by Financial Industry Regulatory Authority (FINRA) based upon FINRA finding in part that the firm failed to supervise its penny stock transactions to ensure compliance with federal securities laws. Letter of Acceptance Waiver and Consent No. 2014039396101 (Sept. 7, 2017).
According to the AWC, the firm was required to create and implement compliance measures to ensure that the firm compiled with Securities Act of 1933 Section 5 registration requirements. Supposedly, Hurst was tasked with reviewing customers’ microcap stock certificates to assess whether stocks had been properly registered and were able to be sold.
The AWC stated that between April of 2013 and January of 2014, a total of twenty three million microcap securities shares had been sold by customers of the firm’s registered representative, VL, generating $889,000.00 in proceeds by those customers.
Evidently, when customers of VL deposited stocks in their investment accounts, Hurst failed to assess whether the stocks could be resold or had been properly registered. The AWC stated that Hurst depended entirely on interested party representations instead of undertaking reasonable due diligence concerning possible unregistered securities distributions. FINRA found that the firm’s failure to reasonably execute due diligence for its microcap stock sales was violative of FINRA Rule 2010 and NASD Conduct Rule 3010(a).
The AWC also revealed that the firm failed to comply with penny stock rules in another respect. Apparently, with at least twenty of VL’s customers that executed microcap stock transactions, the firm either did not provide a Risk Disclosure Document to the customer or procure an acknowledgment from the customer about the microcap stock transactions. Additionally, the AWC stated that ten customers executed purchases of microcap stock before Revere Securities either provided a suitability statement to the customers, procured information about the suitability of transactions, or procured a signed purchase agreement from the customer.
Moreover, the AWC stated that the firm depended entirely on brokers to identify transactions where further documentation was required to be provided in reference to suitability. Ultimately, FINRA found that the firm’s lack of compliance was violative of FINRA Rule 2010 and NASD Conduct Rule 3010(a). The firm was fined $75,000.00 and Hurst was suspended in all principal capacities.
Hurst’s registration with Revere Securities has been terminated as of May 27, 2015. Since January 11, 2016, he has been registered with Paulson Investment Company LLC.
