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FINRA Hits Paulson Investment Company With $100,000 Fine and Censure

Paulson Investment Company, an investment banking firm focused on small-cap and mid-cap markets, has agreed to pay a fine of $100,000 as a part of a settlement with the Financial Industry Regulatory Authority.

FINRA alleged that, from May 2018 through April 2019, Paulson failed to file required documents and information in regard to seven public securities offerings. Additionally, the firm failed to disclose all underwriting compensation received in two of the offerings. For the same time period, FINRA also accused Paulson of lacking adequate supervisory systems and written procedures.

According to FINRA, Paulson violated multiple FINRA rules, including Rule 5110, known as the Corporate Finance Rule, which requires members that participate in a public offering to file proper information about the underwriting terms and arrangements before the offering commences. Specifically, 5110(b) requires, among other things, that certain documents be filed with FINRA “no later than one business day after any such documents are filed with or submitted to the SEC or state regulatory authorities.” 5110(c) defines underwriting compensation and requires that underwriting compensation is disclosed in the prospectus.

Rule 3110 requires each member firm to establish a supervisory system “that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.”

Without admitting or denying the allegations, Paulson agreed to a $100,000 fine and a censure. The firm also agreed to certify that it will implement a supervisory system within 90 days.

Paulson Investment Company LLC – an investment-banking firm headquartered in Portland, Ore. – has been a FINRA member since 1971. Paulson derives more than 50% of its annual revenue from underwriting activities, currently employs approximately 65 registered representatives, and has 11 branch offices.

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