Odeon Capital Group Fined $250K for Supervisory Lapses in SPAC Offerings

The Financial Industry Regulatory Authority announced that it has censured and fined Odeon Capital Group LLC $250,000 for failing to establish and maintain adequate supervisory systems and written supervisory procedures related to its role as a qualified independent underwriter in six public offerings of special purpose acquisition companies, or SPACs.

FINRA reported that between November 2020 and December 2021, Odeon was retained by another FINRA member firm, known as Firm A, to act as the qualified independent underwriter for six public SPAC offerings. The role of a qualified independent underwriter is crucial in ensuring the integrity of public offerings, particularly when the offering involves a conflict of interest, as was the case with Firm A. FINRA stated that, for five of the offerings, Odeon only reviewed the Form S-1 registration statement and performed no other due diligence inquiries.

Furthermore, from November 2020 to January 2024, FINRA found that Odeon’s supervisory systems and written supervisory procedures were not compliant with FINRA Rule 5121, which governs the conduct of qualified independent underwriters. Additionally, until May 2021, the written supervisory procedures did not even discuss SPACs or the associated risks, despite Odeon’s involvement in such offerings.

According to FINRA, these supervisory failures constituted violations of FINRA Rules 3110 and 2010. Rule 3110 mandates that member firms establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and with FINRA rules. Rule 2010, in turn, requires member firms to uphold high standards of commercial honor and just and equitable principles of trade.

Without admitting or denying the findings, Odeon agreed to the fine, censure, and to implement corrective measures to prevent future misconduct. The firm has reportedly updated its written supervisory procedures to include provisions related to FINRA Rule 5121 and the specific requirements for qualified independent underwriters. It has also established a supervisory system to monitor compliance with these rules.

Odeon is a full-service investment banking firm and broker-dealer that offers trading in equities, options, and government or municipal securities to institutional clients, as well as engages in underwriting. Odeon has 105 registered representatives working in three branch offices, including its New York headquarters.

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