FINRA Fines CIM Securities $70,000 for Multiple Securities Violations
CIM Securities LLC, a New Jersey-based independent investment bank, has been censured and fined $70,000 by the Financial Industry Regulatory Authority for alleged securities violations, including conducting an unregistered distribution of securities, failing to respond to certain red flags, and failing to meet filing requirements for private placement offerings.
According to FINRA, between April and September 2022, CIM sold to one investor a private placement offering for which no exemption from registration was available. This, therefore, constituted an unregistered distribution of securities. FINRA also said that, during the same period, CIM failed to reasonably respond to red flags concerning the issuer of that same offering.
FINRA reported that the issuer engaged in general solicitation by issuing press releases about the offering and referred the one accredited investor who purchased the offering. The issuer was a covered person because he acted as a compensated solicitor for the offering. The issuer, however, did not disclose that he had previously been convicted of wire fraud and money laundering in May 2013 for selling investment contracts in a fraudulent real estate investment scheme and was subsequently barred by the SEC.
Also, FINRA said that CIM failed to reasonably respond to red flags that suggested the issuer had lied about his identity, including that he intentionally provided the firm with identity verification documents that did not match his name or age. After the firm discovered this deception, it terminated its involvement with the issuer and self-reported the issue to FINRA.
Furthermore, FINRA announced that, from June to September 2022, CIM distributed sales communications for an offering that did not sufficiently disclose risks associated with the offering necessary to make the communications fair and balanced and contained misleading, promissory and unwarranted statements; from September 2021 to January 2024, the firm failed to establish and maintain written supervisory procedures reasonably designed to achieve compliance with its obligations to conduct reasonable due diligence of private placement offerings; and finally, from September 2021 to June 2023, the firm failed to meet its filing requirements for five private placement offerings.
These oversights violated several FINRA rules, including Section 5 of the Securities Act of 1933 which prohibits the offer or sale of securities unless either a registration statement is in effect as to such securities or the sales are exempt from registration. FINRA also said the firm failed to achieve compliance with Regulation Best Interest, which requires broker-dealers to act in the best interest of their customers.
Without admitting or denying the findings, CIM agreed to the censure and the fine. FINRA did state that, in February 2024, CIM amended its written supervisory procedures.
Last year, as previously reported by The DI Wire, the U.S. Securities and Exchange Commission raised concerns about the accounting methods used by the CIM Opportunity Zone Fund, which caused the fund to restate its previously reported financial statements.
Headquartered in Wall Township, N.J., CIM Securities LLC is an independent investment bank that serves micro-cap and small-cap companies by providing capital-raising solutions and also merger and acquisition services for companies seeking growth capital or services. The firm has one branch with six registered representatives.
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