NEXT Financial Group has been fined by the Financial Industry Regulatory Authority (FINRA) for failing to conduct adequate due diligence on private placement offerings by Provident Royalties. NEXT was responsible for selling tens of millions in Provident, which caused its investors to lose hundreds of millions of dollars. NEXT will pay a $50,000 fine and $2 million in restitution to clients. Also, the Securities and Exchange Commission (SEC) has accused Provident of committing fraud, and at least one Provident broker has admitted to such allegations.

Due diligence requires a reasonable investigation of all material facts before entering into an agreement or transaction with another person or entity. It is a measure taken to prevent unnecessary harm to an innocent party. The measure would require an entity offering and selling a security to analyze the legitimacy, nature, and risks associated with the product.

According to FINRA, NEXT did not perform adequate due diligence prior to the offering. However, NEXT did receive a fee for purportedly reviewing the private placement memorandum for the offering. This shortcoming clearly fell below FINRA's due diligence requirements. In fact, NEXT did not see any financial figures or any other information that was not contained in the private placement memorandum.

Securities regulators have fined NEXT for committing violations in the past. Some examples include failure to report customer complaints, disclosing private customer information, failure to supervise and detect churning, and excessive trading activity.

Were you a NEXT Financial Group client who suffered losses in Provident Royalties? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website,, post a comment, call (800) 732-2889, or email Mr. Pearce at for answers to any of your questions about this blog post and/or any related matter.