The Financial Industry Regulatory Authority has fined two broker-dealers, Dempsey Lord Smith LLC and BD4RIA Inc., which sold GPB Capital private placement securities, according to settlement letters issued by the regulator.
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.
FINRA claims that Dempsey Lord Smith LLC, which has approximately 100 registered representatives, made unsuitable recommendations of GPB Capital securities to four investors and “negligently omitted” to tell them that GPB hadn’t made their required financial filings with the SEC, including filing audited financial statements. FINRA noted that those four sales totaled $323,000, and the firm received $25,840 in commissions.
Also, between September 2015 and June 2018, Dempsey Lord reps sold GPB Capital securities to four customers that were unsuitable considering the customers’ investment profiles, FINRA alleged. The customers were either non-accredited and/or their GPB investments exceeded the firm’s 20 percent concentration threshold for alternative investment holdings.
Dempsey Lord was censured and ordered to pay a $70,000 fine, as well as partial restitution of $29,840 plus interest.
BD4RIA, which has approximately 13 registered representatives and primarily sells mutual funds, variable annuities, and alternative investments, is accused of failing to tell seven investors that GPB did not make their required financial filings with the SEC. Those seven sales were made during June 2018 and totaled $500,000, of which BD4RIA received $40,000 in commissions, FINRA said.
BD4RIA was fined $45,000 and ordered to pay partial restitution of $40,000 plus interest.
Both firms agreed to FINRA’s sanctions without admitting or denying the allegations.
GPB served as the general partner of several investment funds, including GPB Holdings LP, GPB Holdings II LP, GPB Automotive Portfolio LP, GPB Waste Management LP, and GPB Cold Storage, LP.