Ross Sinclaire Associates LLC a securities broker dealer headquartered in Cincinnati Ohio has been censured and fined $200,000.00 by Financial Industry Regulatory Authority (FINRA) based upon findings that (1) Ross Sinclaire did not make required disclosures to investors concerning its municipal offering and (2) Ross Sinclaire failed to supervise activities relating to stockbrokers’ direct market access. Letter of Acceptance Waiver and Consent No. 2017052424001 (June 10, 2019).
According to the AWC, Ross Sinclaire had been designated as the agent for an issuer’s private placement notes offering. Evidently, in this capacity, the firm participated in the creation and dissemination of investment documentation, including a Confidential Information Memorandum, to accredited investors. The AWC stated that the proceeds were reportedly intended to help fund a film production company.
Apparently, the Confidential Information Memorandum utilized by Ross Sinclaire did not identify that the issuer’s vice president was also one of the stockbrokers at Ross Sinclaire. Additionally, the AWC stated that the firm failed to disclose that in addition to the two percent commission that it would receive from the investors, it would also be receiving half of the Tax Creditor Lenders revenues derived from consummating the transaction. FINRA found that the firm’s omissions in this respect were violative of Securities Act of 1933 Section 17(a)(2) and FINRA Rule 2010.
The AWC additionally stated that from December 2015 to December 2016, relevant investment information that was supposed to have been included in a Private Placement Memorandum had been omitted by the firm. Evidently, the PPM pertained to an offering underwritten by the firm that consisted of the issuance of municipal bonds to investors so funds could be raised for a recreational center. Evidently, in the PPM, there was no refence to a threat made by the issuer of defaulting on existing obligations to bond holders. The firm additionally did not identify that the lending arrangement was between the firm and the issuer. The AWC stated that if investors knew of the information that had been omitted by the firm, this could have changed their decision to make investments in the municipal bonds. FINRA found that the firm’s conduct in this respect was violative of MSRB Rule G-17.
Moreover, the AWC stated that the firm neglected to create and implement an adequate supervisory system and risk management system to govern its traders’ direct market access. FINRA found the firm’s conduct in this regard to be violative of Securities Exchange Act of 1934 Section 15(c), Securities and Exchange Commission (SEC) Rule 15c3-5(b) and (c) as well as Municipal Securities Rulemaking Board (MSRB) Rule G-27. FINRA additionally stated that the firm’s supervisory structure was not compliance with the Securities Exchange Act, and therefore ran afoul of FINRA Rule 2010.
