The firm distributed a document called “Investor Letter” for a company; the Investor Letter constituted a research report, but it failed to disclose a firm representative’s ownership interest in the company and his receipt of compensation from the company. 

The firm permitted its registered persons to use presentations regarding the company to solicit potential investors at seminars; the presentations contained statements and projections that were without basis; were false, exaggerated, unwarranted and/or misleading; and failed to provide a balanced presentation by omitting material information regarding the significant risks associated with investing in the company. The firm failed to establish, maintain and enforce a system of supervisory control policies and procedures that tested and verified that its supervisory procedures were reasonably designed with respect to the activities of the firm, its registered representatives and associated persons to achieve compliance with applicable securities laws and regulations, and created additional or amended supervisory procedures where such testing and verification identified a need. The firm’s supervisory control policies and procedures failed to identify producing managers and assign qualified principals to supervise such managers, and the firm failed to electronically notify FINRA of its reliance on the limited size and resources exception. 

In addition, F for one year-end, the firm failed to prepare an annual certification from its CEO or equivalent officer, that it had in place processes to establish, maintain, review, test and modify written compliance policies and WSPs reasonably designed to achieve compliance with applicable FINRA rules, MSRB rules and federal securities laws and regulations, and that the CEO had conducted one or more meetings with the firm’s CCO in the preceding 12 months to discuss such processes. For another year-end, the firm filed an annual certification that did not fully comply with FINRA Rule 3130(c). Moreover, the firm failed to establish, maintain and/or enforce WSPs reasonably designed to achieve compliance with the laws and regulations applicable to its business in conducting private placement offerings (including training representatives regarding the risks for these offerings and establishing standards for determining the suitability of these offerings for investors), the review of electronic correspondence and the review and approval of advertising materials.