Massachusetts Moves Against BD for Failing to Provide Investors with Due Diligence Info
The Massachusetts Securities Division has filed an administrative complaint against a broker-dealer for failing to disclose material information in connection with the sale of private placement securities. The MSD also alleges that the BD violated Regulation D by not having a pre-existing relationship with prospective investors and not restricting sales presentations and materials to accredited investors. The MSD alleges that the BD ignored risks and recommended disclosure made by a third party due diligence analyst, who questioned the issuer’s financials. Instead, the MSD alleges the BD sold the securities as a safe and secure fixed income alternative. The Subscription Agreement included a certification that the BD believed the investment to be suitable and that it had disclosed all material information. The MSD seeks restitution for Massachusetts investors in addition to fines and censure.
OUR TAKE: Placement agents have a due diligence and suitability obligation with respect to securities they distribute. Many firms may not be clear about the extent of their due diligence obligation, but they certainly cannot intentionally ignore specific information in their possession.
Leave a Reply
You must be logged in to post a comment.