The Financial Industry Regulatory Authority has fined broker-dealer, United Planners’ Financial Services of America, $40,000 over sales of GPB Holdings II LP, a private placement offering sponsored by GPB Capital, according to a settlement letter issued by the regulator.
GPB Holdings II was formed in 2015 to buy and operate companies in the automotive retail and managed information technology sectors. After conducting due diligence on the offering, United Planners approved the fund for sale by its registered representatives in February 2017.
According to FINRA, United Planners “negligently omitted” to tell four investors in GPB Holdings II that the firm failed to timely make required financial filings with the Securities and Exchange Commission, including filing audited financial statements. The principal value of those four sales, which occurred between May 4, 2018 and June 29, 2018, totaled $450,000. The broker-dealer received $37,127 in commissions.
GPB Holdings II raised more than $600 million from accredited investors between April 2015 and June 2018.
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, including United Planners, that it was in the process of registering certain classes of securities issued by GPB 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, United Planners sold four limited partnership interests in GPB Holdings II without informing its customers about the delayed SEC filings.
In addition to a censure and fine, United Planners was ordered to pay partial restitution of $37,125 plus interest.
Last week, FINRA ordered broker-dealer National Securities Corporation to pay approximately $9 million for multiple regulatory violations, including not telling investors that GPB had not timely filed its audited financial statements, as well as other required documents.
United Planners has approximately 560 registered representatives and 350 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.