TriPoint Global Equities LLC a FINRA member brokerage firm headquartered in New York New York has been charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that it effected unlawful sales of penny stocks. Department of Enforcement v. TriPoint Global Equities LLC et. al. Disciplinary Proceeding No. 2015048172801 (Sept. 7, 2018).
According to the Complaint, between November 2011 and December 2015, a penny stock business was operated by TriPoint, where the firm executed transactions for its customers who were mainly focused on depositing and liquidating microcap stocks or penny stocks.
The Complaint stated that the firm executed transactions in violation of Securities Act of 1933 Section 5’s registration requirements. Specifically, the firm allegedly assisted customer EM in the re-sale of an estimated 16,907,900 shares of two penny stock issuers, BRWC and PZOO. The Department of Enforcement stated that the firm did not create and implement an adequate supervision system with a view towards ensuring compliance with Securities Act of 1933 Section 5.
Specifically, the Complaint stated that the firm’s supervisory procedures did not ensure that the customers’ penny stocks or microcap securities were sold according to a proper registration statement or had contained an exemption from the registration requirements. Apparently, the firm’s written supervisory procedures did not detail much beyond stating that the firm was required to comply with Section 5 requirements concerning sales of securities in a restricted or controlled state.
The Complaint alleged that the firm’s written supervisory procedures insufficiently described the specific manner in which documents connected to the securities transactions needed to be obtained and reviewed so that the firm did not make a distribution that was unlawful. Moreover, the firm seemingly did not mandate that the head trader verify the customers’ information about securities when they were deposited.
The Complaint further stated that the firm did not identify in its written supervisory procedures which supervisor was obligated to analyze the securities held by the customers to make sure that they were allowed to be re-sold. Apparently, the firm used a Section 5 Process Document, however, this document failed to identify who at TriPoint was responsible for ascertaining the validity of information about the low-priced restricted securities before they were deposited or liquidated.
Consequently, FINRA alleged the firm was unable to determine that BRWC and PZOO were not eligible for an exemption under Rule 144 and Securities Act of 1933 Section 4(a)(1), violating Securities Act of 1933 Section 5. The Complaint alleged that the firm’s conduct was also violative of FINRA Rule 2010 and National Association of Securities Dealers (NASD) Arbitration No. 3010(a).
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