As his member firmís CCO, Mercier shared responsibility with
the firmís president for conducting due diligence for private placements in
which the firm acted as a selling agent only because the firm did not have WSPs
addressing due diligence for private placements where the firm acted as the
selling agent only.
Mercier signed selling agreements
for offerings and, consistent with the terms of the agreements, his firm
received fees and/or commissions for soliciting investors, which included a
specific fee related to due diligence purportedly performed in connection with
each offering. Mercier did not perform any due
diligence and did not seek or obtain due diligence reports for the offerings,
which identified red flags with respect to the offerings. Mercier should have scrutinized each of the offerings given the
high rates of return, but did not take the necessary steps to ensure that these
rates of return were legitimate and not payable from proceeds of later
offerings, in the manner of a Ponzi scheme.
Mercier did not
conduct meaningful due diligence for these offerings prior to approving them
for sale to firm customers, and failed to have reasonable grounds for allowing
firm representatives to continue selling the offerings despite the negative
information and identified red flags. Acting on
his firmís behalf, Mercier failed to maintain a supervisory system reasonably designed
to achieve compliance with applicable securities laws and regulations with
respect to the offerings.