Securities Lawyers Blog
This post continues our firm’s investigation concerning the recent allegations brought by The Financial Industry Regulatory Authority (FINRA) sanctioning brokerage firm World Equity Group, Inc. (World Equity) concerning at least seven different allegations of supervisory failures that occurred between 2009 through 2012. FINRA’s allegations include failures to implement an adequate supervisory system and concerned both internal processes at the firm and procedures and in the handling of customer accounts in the areas of suitability of transactions in non-traditional ETFs, private placements, and non-traded REITs.
FINRA requires firms preserve for at least 6 years all communications relating to its business and to provide for ways to store electronic media. FINRA found that in May 2011, the World Equity opened a new branch office at 311 W. Monroe Street, Chicago, Illinois. FINRA alleged that errors in the process of transferring several representatives at that branch to World Equity emails of the representatives were not maintained and preserved before April 13, 2012. In addition, FINRA found that the firm failed to maintain business related emails for ten representatives who used their personal emails for business purposes.
FINRA also alleged that World Equity failed to conduct due diligence in connection with private placements offering from July 2009, through January 2012. During that time FINRA alleged that the firm conducted at least eight private placements including a product called Newport Digital Technologies, Inc. (NDT) and sold more than $6 million in these offerings. In addition, FINRA found that from August 23, 2010 to July 17, 2012 the firm conducted at least five Non-Traded REIT offerings and sold more than $3 million in these offerings.
FINRA found that while World Equity conducted due diligence on these offerings and maintained associated due diligence files for each offering, the files contained third party diligence reports and other documents, there was insufficient documentation demonstrating whether the reports were actually reviewed by anyone at the firm or whether an independent review of the information occurred. In addition, FINRA alleged that several of these third party diligence providers were hired by the issuers to conduct the diligence review which raise questions of a potential conflict of interest. FINRA also alleged that the firm’s written procedures were also inadequate in that they only generically referenced CCO review and failed to identify specific steps to be taken nor did the procedures outline how the firm would document and evidence the due diligence.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of unsuitable investments in Non-Traded REITs, private placements, and other securities. Our consultations are free of charge and the firm is only compensated if you recover.