Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
October 2010
Commonwealth Church Finance, Inc. dba Charter Financial Services
AWC/2008011619001/October 2010

Commonweatlh commenced bond offerings on a “best efforts” basis including a minimum contingency, in which escrow was broken without disclosing in the offering memoranda the possible use of loan proceeds to close the offerings.

In order to raise sufficient funds for one of the offerings, the issuer obtained a loan from a bank prior to closing the offering, and while the firm was not involved with obtaining the loan, it was aware that the loan had been obtained and the escrow account had been broken prior to the sale of the required minimum.  To meet the required minium of the other offering, the issuer obtained a loan that the escrow agent considered in part as satisfying the offering contingency, and the funds were then used to retire the earlier bond issue as represented in the offering memorandum.

The Firm allowed the representations in the offering memorandums that investor funds would not be released until the contingency amounts were met to be rendered false and misleading. The Firm used unwarranted, exaggerated and oversimplified statements in connection with sales literature, including an oral presentation and a brochure, and failed to provide a sound basis to evaluate the bonds or risks involved.

Commonwealth Church Finance, Inc. dba Charter Financial Services : Censured; Fined $40,000
Tags:  Best Efforts Offering    Minimum Contingency    Escrow     |    In: Cases of Note : FINRA
February 2010
Aurora Capital LLC
AWC/2008011646701/February 2010
Without notifying FINRA, the Firm participated in firm commitment offerings while operating pursuant to a membership agreement that allowed it to engage in underwriting or selling group participant of public offerings of corporate securities, other than mutual funds, on a best efforts basis only, and that required prompt notification if the firm engaged in any underwriting or selling group activity of firm commitment offerings. As a result of the firm’s participation in the firm commitment offerings, the firm conducted a securities business while failing to maintain its minimum net capital requirements.
Aurora Capital LLC : Censured; Fined $10,000
Bill Singer's Comment
If you are a FINRA member, then you should have a Membership Agreement that was issued to your firm when it first gained membership (and which was amended from time to time as it sought to expand into areas not approved in the initial agreement).  Unfortunately, with the comings and goings of firm staff and the games that memory often plays, the terms by which your firm is bound may vary significantly from what you think they are or what someone swears to you is the case.

As Wall Street hopefully heals, there will likely be increased IPO activity.  Before you sign-off on any participation by your firm, make sure that your FINRA Membership Agreement permits the contemplated level of activity.
Enforcement Actions