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FINRA Sanctions 8 Firms for Due Diligence Failure in Private Placements

By Jonah Toleno of Shustak Reynolds & Partners, P.C. posted on Tuesday, November 29, 2011.

The Financial Industry Regulatory Authority (FINRA), the self-regulated organization responsible for overseeing brokers and broker-dealers, has sanctioned eight firms and ten individuals for recommending private placement investments without a reasonable basis to customers. Among the firms sanctioned are: NEXT Financial Group; Investors Capital Corporation; Garden State Securities; Capital Financial Services; National Securities Corporation; Equity Services; Securities America; and Newbridge Securities Corporation. FINRA sanctioned the firms and individuals a total of $3.2 million in restitution. FINRA asserts the firms and certain principals failed to conduct the requisite due diligence and did not have adequate supervisory systems in place to identify and understand the inherent risks of the private placement offerings. This sanction marks the latest in a series of inquiries by FINRA into improperly recommended private placements. If you think you have been recommended an unsuitable private placement investment by any of these or any other firms, you may contact our managing partner, Erwin Shustak, at (619) 696-9500 or [email protected]. Our firm currently is handling a number of claims on behalf of investors involving unsuitable private placements. We offer a free initial consultation and have decades of experience with a wide range of investment claims, including Medical Capital notes sold by Securities America and other private placements and due diligence issues.

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