FINRA Fines Another Broker-Dealer over GPB Private Placement Sales
The Financial Industry Regulatory Authority has fined broker-dealer, Sanctuary Securities Inc., over sales of two GPB private placement offerings.
The Financial Industry Regulatory Authority has fined broker-dealer, Sanctuary Securities Inc., formerly known as David A. Noyes & Company, $60,000 over sales of GPB Automotive Portfolio LP and GPB Holdings II LP, two private placement offerings sponsored by GPB Capital, according to a settlement letter issued by the regulator.
GPB Automotive was formed in 2013 to invest in automotive dealerships, while GPB Holdings 1 was formed in 2015 primarily to invest in the automotive, retail, and managed information technology sectors.
According to FINRA, Sanctuary Securities “negligently failed” to tell eight investors that GPB had failed to timely make required financial filings with the Securities and Exchange Commission, including filing audited financial statements. The principal value of those eight sales, which occurred between June 8, 2018 and June 29, 2018, totaled $600,000. The broker-dealer received $48,000 in commissions.
GPB Capital is a New York-based alternative asset management firm founded in 2013 that sponsors a number of Regulation D private placement investment funds. Last year, the Justice Department and the Securities and Exchange Commission charged the firm and its executives with running a fraudulent “Ponzi-like scheme” that raised approximately $1.8 billion from investors.
In July 2017, GPB Capital filed a lawsuit in New York against one of its former operating partners who had allegedly failed to acquire certain automotive dealership interests. The former partner made various counterclaims, including that GPB allegedly falsified financial statements to conceal fraud. GPB Capital denied the allegations and the litigation remains pending.
GPB Capital later notified broker-dealers that sold its products that it was in the process of registering certain classes of securities issued by its limited partnerships with the SEC. As part of that process, GPB was required to file audited financial statements, which they said would be delayed pending the completion of a forensic audit.
Specifically, GPB disclosed that it and its auditors “determined that it would be prudent to hire a third-party firm to complete a forensic audit in order to endeavor to put [the former partner’s] counterclaims and other allegations to rest.” FINRA said that the offering documents were not timely amended to disclose that the filings would be delayed.
FINRA claims that after receiving the notice from GPB, Sanctuary Securities sold four limited partnership interests in GPB Automotive and four limited partnership interests in GPB Holdings II.
In addition to a censure and fine, Sanctuary Securities agreed to pay partial restitution of $48,000 plus interest.
Similarly, FINRA has censured and fined several broker-dealers in recent months over similar alleged conduct, including Capital Investment Group, United Planners, National Securities Corporation, IBN Financial Services, Geneos, Dempsey Lord Smith LLC, and BD4RIA Inc.
Sanctuary Securities, founded in December 1939, was known as David A. Noyes & Company until March 2020, when it changed its name in connection with a change in management and control at the firm. The firm, which has approximately 270 registered representatives and 57 branch offices, is an introducing broker-dealer that engages in a general securities business, including the sale of equity securities and private placements.
