As his member firm’s CCO, Mercier shared responsibility with the firm’s 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 firm’s behalf, Mercier failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations with respect to the offerings.