FINRA Fines Broker-Dealer $45,000 over GPB Private Placement Sales
The Financial Industry Regulatory Authority has fined IBN Financial Services $45,0000 over sales of GPB Capital private placement securities, according to a settlement letter issued by the regulator.
The Financial Industry Regulatory Authority has fined IBN Financial Services $45,0000 over sales of GPB Capital private placement securities, according to a settlement letter issued by the regulator.
According to FINRA, IBN “negligently omitted” to tell eight investors in two GPB offerings that the firm failed to timely make required financial filings with the Securities and Exchange Commission, including filing audited financial statements.
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.
According to FINRA, IBN approved the sale of two GPB private placements, GPB Automotive Portfolio LP and GPB Holdings II LP, after conducting due diligence on the offerings.
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, including IBN, that it was in the process of registering certain classes of securities issued by Automotive Portfolio and Holdings II 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, IBN sold five limited partnership interests in GPB Automotive Portfolio and three limited partnership interests in GPB Holdings II.
The eight sales totaled $466,500, and IBN received $32,400 in commissions.
FINRA claims that IBN’s representatives did not inform the customers that GPB had not filed their audited financial statements with the SEC or the reasons for the delay.
In addition to the $45,000 fine, IBN was ordered to pay partial restitution of $32,385, plus interest.
IBN has approximately 75 registered representatives and 25 branch offices, and sells equity securities, mutual funds, variable annuities, and private placements. The firm agreed to FINRA’s sanctions without admitting or denying the allegations.
This matter originated from FINRA’s investigation into firms that sold GPB securities.
