FINRA Fines Concorde $130,000+ for Unsuitable GPB Capital Sales
The Financial Industry Regulatory Authority announced that it has censured and fined Concorde Investment Services LLC, a Michigan-based registered investment adviser, broker-dealer, and insurance firm for failing to reasonably supervise recommendations made to purchase alternative investments related to GPB Capital Holdings LLC, a global investment management firm focused on income-producing private equity and real estate.
FINRA stated that between November 2015 and April 2018, Concorde failed to reasonably supervise recommendations to purchase GPB Capital limited partnership interests made to six retail customers for whom those recommendations were unsuitable. All six customers had conservative or moderate risk tolerances, and the recommendations were unsuitable for those customers in light of the substantial risks of the GPB Capital limited partnership interests.
Additionally, Concorde maintained suitability guidelines that permitted representatives to recommend that customers hold, at most, 30% of their exclusive net worth in alternative investments. The recommendations made by Concorde’s representatives resulted in five of these customers, all of whom were seniors, investing over 30% of their exclusive net worth in alternative investments. FINRA reported that such concentrated positions were unsuitable.
Additionally, Concorde failed to reasonably respond to these red flags that its representatives were making unsuitable recommendations. After receiving and reviewing the suitability paperwork submitted by its representatives, Concorde performed no further inquiry to determine whether the recommendations were suitable in light of the customers’ investment profiles.
According to FINRA, these oversights violated Rule 3110 which “requires a member firm to establish, maintain and enforce a system, including written supervisory procedures, to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations…” and FINRA Rule 2111 which “requires member firms and their associated persons to have a reasonable basis to believe that a recommended securities transaction or investment strategy is suitable for a customer based on information obtained through the reasonable diligence of the firm or associated person to ascertain the customer’s investment profile.”
Without admitting or denying the claims, Concorde agreed to a censure and a fine of $110,000, plus partial restitution of $20,382.39, plus interest. The partial restitution will be paid to three of the six customers. Three customers will not receive partial restitution because they previously settled claims related to their GPB Capital investments with the firm.
As previously reported by The DI Wire, the SEC charged three GPB Capital executives and their affiliated entities with running a “Ponzi-like scheme” in February 2021. Last year, several former advisers and broker-dealers were fined over GPB sales.
Additionally, as previously reported by The DI Wire, Concorde recently made headlines by securing a partnership with the due diligence analytics platform, LINK.
Headquartered in Ann Arbor, Mich., Concorde Investment Services has 53 branch offices and approximately 145 registered representatives.
GPB Capital is a New York-based alternative asset management firm founded in 2013. GPB Capital serves as the general partner for limited partnerships formed to acquire income-producing companies. From 2013 through 2018, GPB Capital launched several limited partnerships, each focused on acquiring controlling interests in private-sector companies.
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