Omaha, Nebraska based Haley Securities submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $20,000, and consented to the entry of the Financial Industry Regulatory Authority's findings that it was solely engaged in the sale of private offerings of securities designed to raise equity for an affiliate, Haley Associated Limited Partnership (HALP). While selling the private placements and limited partnerships, HALP relied on the Rule 506 exemption from registration under Regulation D. FINRA stated that the firm sold some interests in HALP's offerings by soliciting potential investors at the suggestion of existing customers or at meetings convened by third parties.
The Securities Act of 1933 provides several exemptions to the securities registration requirements of Section 5 of the Act. For an issuer to be afforded the protection of the Regulation D, Rule 506 private offering registration exemption, it must not engage in any "general" solicitation. In order for a solicitation to not be general, the firm must have a substantive, pre-existing relationship with the potential investor. A substantive, pre-existing relationship may exist if the potential investor previously invested in public or private securities offered through the firm. A firm may also establish a substantive, pre-existing relationship by having interested persons fill out general questionnaires that do not relate to any offering. In addition, there must be sufficient time between establishment of the relationship and the solicitation for the sale of an unregistered security.
Although Haley created questionnaires for purchasers, only some contained the annual income information for the customers, and none of them contained the purchaser's net worth, the name and address of the purchaser's employer, and the customer's tax status. The firm was to supposed provide these customers with a copy of an account record or an alternative document with all of the required information within 30 days after opening an account with the firm. For nearly three years, the firm's customers were provided with the questionnaires, but they did not receive other documentation the firm maintained that revealed their investment objectives and other background information.
FINRA's findings also included that for almost two months, the firm permitted its president and supervising principal to engage in securities-related activities as a general securities principal while his registration status with FINRA was inactive due to his failure to timely complete continuing education (CE) requirements. The president's activities included the approval of securities sales by signing and initialing subscription agreements.
In addition to all this, Haley Securities failed to establish, maintain, and enforce adequate supervisory systems and written supervisory procedures to appropriately monitor sales of private offerings of its affiliate. Broker-dealers must establish and implement a reasonable supervisory system to protect their customers' interests. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from misconduct.
Therefore, investors who have suffered damages due to Haley Securities' failure to monitor its solicitation activities can bring forth claims to recover losses against Haley Securities, which should have watched over the above described illegal activity. Have you suffered losses in a private placement or limited partnership or any other investment sold by Haley Securities, Inc.? 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, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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