Articles Tagged with LaSalle St. Securities

shutterstock_188383739The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Thomas Stamborski (Stamborski) working out of Palatine, Illinois alleging that the broker failed to disclose certain changes to an outside business activity.  According to the FINRA regulatory action (FINRA No. 2015044783401) Stamborski consented sanctions in the form of a permanent bar because he failed to provide documents and information requested by FINRA during the course their investigation into allegations concerning his resignation from his member firm, LaSalle St Securities, LLC (LaSalle St). LaSalle St allowed Stamborski to resign after it was alleged that he failed to update an Outside Business Activity with his firm when a material change occurred.

As a background, the providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible outside business activities and private securities transactions – a practice known in the industry as “selling away”.  At this time it unclear the nature and scope of Stamborski outside business activities.  However, according to Stamborski’s public records his outside business activities includes Axis Financial Corporation.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

Stamborski entered the securities industry in 1984.  From September 2005 until December 2015, Stamborski was associated with LaSalle St.

shutterstock_145123405The Financial Industry Regulatory Authority (FINRA) sanctioned three firms, H. Beck, Inc. (H. Beck), LaSalle St. Securities, LLC (LaSalle), and J.P. Turner & Company, LLC (JP Turner) – with fines of $425,000, $175,000 and $100,000, respectively concerning inadequate supervision of consolidated reports provided to customers.

As a background, a consolidated report is a single document that combines information regarding a customer’s financial holdings. Consolidated reports are used to supplement, but do not replace, official account statements disseminated by brokerage firms and market makers. FINRA released a regulatory notice reminding firms that consolidated reports must be clear, accurate and not misleading. Because these reports are not official reports FINRA is concerned that if consolidated report making is not rigorously supervised there is the potential for communications to be inaccurate, confusing, or misleading to customers. Consolidated reports can also be used for fraudulent or unethical purposes.

In the agency’s findings, FINRA determined that numerous registered representatives of the three firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal. In particular, H. Beck and J.P. Turner did not have any written procedures specifically addressing the use and supervision of consolidated reports. In addition, while LaSalle had written procedures related to consolidated reports, it failed to enforce the procedures.

shutterstock_178801067This article continues the examination of the findings by The Financial Industry Regulatory Authority (FINRA), in an acceptance, waiver, and consent action (AWC), concerning LaSalle St. Securities, LLC (LaSalle) private placement deficiencies.  FINRA also found that LaSalle served as the placement agent for a 2009 private placement offering by Revitalight Operators, LLC. The private placement memorandum (PPM) stated investors would be entitled to a 9% “preferred return” on their outstanding investments prior but that this preferred return was not guaranteed and might never be paid. FINRA found that LaSalle was responsible for the PPM’s contents. The PPM contained a summary of financial projections which FINRA found contained assumptions that the total net return over six years would be $2.050 million and that investors’ capital contributions would be returned in the fiftieth month. The PPM stated that investors could receive a 27.13% annual return on investment. However, FINRA determined that the projected annual return were calculated using a flawed methodology.

Finally, FINRA alleged that member firms that using consolidated reports are communications with the public and must be clear, accurate, and not misleading. Firms should have systems in place to ensure that valuations provided regarding customer assets held at the firm are consistent with the firm’s official account statement distributed to the customer. The firm should also take reasonable steps to accurately reflect information regarding outside accounts and assets. If a firm is unable to adequately supervise the use of the reports then the firm must prohibit dissemination of the reports.

FINRA found that LaSalle had procedures in place governing consolidated reports. The procedures provided that the CCO or specifically designated principals, will review the consolidated reports to ensure adherence to all applicable rules. Despite the procedures, FINRA found that LaSalle had an inadequate system in place because the firm did not ensure that all representatives actually followed the proscribed procedures. FINRA determined that LaSalle’s training was limited to blast emails to brokers advising them that consolidated statements needed to be submitted to the home office for review as correspondence.

shutterstock_187532306The Financial Industry Regulatory Authority (FINRA), in an acceptance, waiver, and consent action (AWC), sanctioned brokerage firm LaSalle St. Securities, LLC (LaSalle) over allegations that staff found certain deficiencies with respect to: 1) a private placement offering involving Seat Exchange Corporation where LaSalle failed to exercise adequate due diligence before allowing a broker to recommend the offering to four investors; 2) a private offering by Revitalight Operators, LLC, LaSalle distributed a private placement memorandum to potential investors that did not include material facts and used a flawed methodology for projecting return on investment; 3) an offering of Platinum Wealth Partners, Inc. (PWP) by one of its brokers the firm failed to supervise; and 4) the fact that LaSalle allowed its representatives to send consolidated reports to its customers but failed to adequately supervise those reports.

LaSalle has been registered with FINRA as a broker-dealer since 1976, has 232 registered representatives, 107 branch offices, and its principal place of business is in Chicago, Illinois. LaSalle has various business lines.

FINRA alleged that in April 2010, a broker with the initials “PL” sought the firm’s approval to recommend the purchase of shares in Seat Exchange Corporation, a Regulation D private placement to four customers. Seat Exchange had only one director, who also owned 21.5% of the company and the placement agent for offering was Chicago Investment Group (CIG). CIG was also an affiliated with Seat Exchange. According to FINRA, LaSalle had supervisory procedures requiring that all appropriate due diligence efforts on behalf of any private placement offering are undertaken and documented or that we obtain sufficient documentation from a third party that they have undertaken sufficient due diligence.

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