Merrimac Corporate Securities and Robert G. Nash (Chief Compliance Officer) of Altamonte Springs Florida are subject of a Securities and Exchange Commission (SEC) Order which sustained in part Financial Industry Regulatory Authority (FINRA) National Adjudicatory Council’s sanctions against Merrimac and Nash based on findings of (1) Merrimac offering and selling securities that were neither registered nor subject of a registration exemption (2) Merrimac and Nash failing to create a supervision system and procedures with a view towards complying with securities laws concerning penny stock transactions and private securities transactions (3) Merrimac engaging in securities business during the period in which the firm was suspended and (4) Merrimac and Nash furnishing false documentation to FINRA during the course of a FINRA investigation. In the Matter of the Application of Merrimac Corporate Securities and Robert Nash Admin. Proc. File No. 3-18045 (July 17, 2019).
According to the Opinion, securities had been directly or indirectly offered or sold by the firm during a period where there had been no active registration statement for those securities. Evidently, there was no exemption to registration for those securities under Securities Act Section 4(a). Nonetheless, the firm engaged in an unregistered securities transaction where more than fifty-six million United States Oil & Gas Inc. penny stock shares had been sold on behalf of a customer, Acadia LLC.
SEC determined that Acadia LLC bought shares of United States Oil & Gas Inc. from Jeff Turnbull – a person who owned Turnbull Oil and sold that company to United States Oil & Gas Inc. as part of a deal where Nash remained as Turnbull’s president. Supposedly, Turnbull was provided a note from United States Oil & Gas. allowing him to convert $250,000 into five hundred million shares of United States Oil & Gas. Apparently, Acadia LLC paid $50,000.00 for United States Oil & Gas shares and held those shares in an account at Merrimac. Shortly thereafter, Acadia LLC sold those shares in the public marketplace. SEC determined that Merrimac maintained false information regarding the registration of those securities.
Apparently, a Deposit Securities Request (DSR) form that had been utilized by Merrimac showed that there was a registration statement (or an exemption) relating to Acadia’s purchase of the shares from Turnbull. SEC found this information to be false. SEC sustained FINRA’s fine of $50,000.00 against Merrimac based on finding the firm’s conduct violative of FINRA Rule 2010 and Securities Act of 1933 Section 5.
SEC also determined that Merrimac and Nash failed to supervise private securities transactions. SEC stated that written notice had been provided by two securities brokers, Tuttle and DuBrule, in regards to the securities transactions they planned to effect away from Merrimac. Apparently, the stockbrokers received approval from the firm to take part in activities involving two hedge funds which Tuttle and DuBrule ran through an intermediary. However, the stockbrokers were not allowed under Merrimac’s policies to offer or sell any investments to the firms existing customers. Nonetheless, customers had been sold $4,100,000.00 in hedge fund investments by Tuttle and DeBrule. SEC stated that there was a lack of supervision on Merrimac’s part concerning these securities sales, and the firm never followed up with the stockbrokers to determine if they complied with the firm’s private securities transaction protocol. SEC sustained FINRA’s $50,000.00 fine against the firm and fine of $25,000.00 against Nash for conduct violative of NASD Rules 2110 and 3010.
SEC additionally found that there were more than seven hundred fifty transactions the firm executed during a time that it was suspended by FINRA. Merrimac reportedly failed to contest this issue, and the firm’s conduct was deemed egregious. SEC sustained FINRA’s sanction against the firm for conduct violative of FINRA Rule 2010.
Moreover, NAC stated that Merrimac and Nash produced fake DSR forms to FINRA. Supposedly, the firm and Nash were instructed by FINRA to hand over documents and information during an investigation. Evidently, FINRA was provided forms which were utilized in order to carry out penny stock transactions that had been signed by Nash supposedly confirming that he properly reviewed stock information concerning those transactions. However, Nash knew that a stockbroker of Merrimac falsified the documents. Indeed, SEC determined that more than thirty documents provided to FINRA had been falsified. Ultimately, SEC sustained FINRA’s suspension of Merrimac, $50,000.00 fine against the firm, and $25,000.00 fine against Nash for conduct violative of FINRA 2010 and 8210.
FINRA Public Disclosure confirms that Nash is the subject of a customer initiated investment related arbitration claim in which he was ordered to disgorge $68,271.00 and pay $83,491.00 in compensatory damages based upon being found liable on the customer’s claims which included that Nash: violated his fiduciary duties to the customer; effected unsuitable and unauthorized transactions; and failed to supervise the customer’s account. FINRA Arbitration No. 16-01128 (May 11, 2018).
Nash’s employment with Merrimac Corporate Securities Inc. has been terminated as of May 15, 2015. FINRA Public Disclosure reveals that Merrimac has been expelled by FINRA effective March 21, 2016.
