TriPoint Global Equities a brokerage firm headquartered in New York, New York, and Andrew Kramer (head of trading at TriPoint) have been sanctioned by Financial Industry Regulatory Authority (FINRA) according to an Order Accepting Offer of Settlement containing findings that the firm failed to supervise its securities transactions with a view towards complying with Securities Act of 1933 registration requirements. Department of Enforcement v. TriPoint Global Equities LLC et al. Disciplinary Proceeding No. 2015048172801 (Mar. 5, 2019).
According to the Order, the firm was required to comply with Securities Act of 1933 Section 5, which proscribes securities sales when there is no registration statement in effect. The Order revealed that the firm served as a broker for customer EM to resell 16,907,900 restricted securities shares. Evidently, registration statements were not effective for the resales of the securities, and no exemption to registration applied. The transaction reportedly caused customer EM to procure $73,458.00 in proceeds, and enabled the firm to take in thousands in commissions.
The Order stated that in November of 2014, a twelve percent convertible note in PZOO had been purchased by customer EM. Subsequently, a partial amount of the note principal had been converted by EM into five million PZOO shares. On May 18, 2015, those shares were reportedly placed by EM in the customer’s TriPoint account for resale despite there being no registration statement. Thereafter, in May of 2015, five million PZOO shares had been sold by EM. In another case, an eight percent convertible note in BRWC had been acquired by EM. Similar to with PZOO, EM reportedly converted a portion of the principal in the BRWC note to obtain shares which he placed into his TriPoint account. Those shares also lacked any registration statement, but were nonetheless resold in September of 2015.
Each time, the firm reportedly generated commission on the illicit sales. FINRA found that each sale was unregistered and nonexempt from registration. Consequently, FINRA found the firm’s conduct violative of FINRA Rules 2010 and Securities Act of 1933 Section 5.
Moreover, FINRA found the firm failed to supervise its securities sales. In particular, the firm reportedly neglected to create and implement a supervision system and written supervision procedures so that it could comply with Securities Act of 1933 Section 5 provisions concerning control or restricted securities. Consequently, there was a lack of any supervisory measures taken to ensure that customers were effecting penny stock securities through the proper registration or exemption process.
Evidently, Andrew Kramer was responsible for monitoring microcap securities liquidations that took place through the firm. In that capacity, Kramer was reportedly tasked with authorizing or denying restricted securities deposits. The Order stated that information and documentation was presented for Kramer’s review when deposits were made. Apparently; however, Kramer simply relied on what customers told him concerning the securities’ salability. Moreover, Kramer was supposedly never obligated under the firm’s supervisory procedures to assess whether it was legal for shares to be sold. As a result, no one analyzed the legality of the resale of BRWC and PZOO shares. Consequently, FINRA found the firm’s conduct violative of FINRA Rules 2010 and 3110(a).
TriPoint was fined and censured $100,000.00 by FINRA; while Kramer was fined $10,000.00 and suspended by FINRA in all principal capacities.
