FINRA Fines Broker $219,000 for Private Placement Violations

November 14, 2016

Thomas Edward Brenner Jr. (CRD #1489233, Orrville, Ohio) submitted an AWC in which he was assessed a deferred fine of $30,000, suspended from association with any FINRA member in any capacity for 16 months, and ordered to pay deferred disgorgement of commissions of $189,000, plus interest. Without admitting or denying the findings, Brenner consented to the sanctions and to the entry of findings that he engaged in two separate private placements which were rife with supervisory and substantive violations.  The findings stated that in soliciting customers to purchase a private placement offering, Brenner provided customers with a private placement memorandum (PPM) for the offering and a program summary, the latter of which provided a brief summary of the offering. Both the PPM and the program summary contained several statements that claimed or implied that the investments were secured, or suggested a level of safety in the investments or reliability in forecasting returns by investors.

The findings also stated that in soliciting investors for another offering, Brenner provided each investor with an application form, a subscription agreement, a promissory note and an executive summary generally describing the offering. At various times while Brenner was soliciting investors in this offering, a founder of the offering told Brenner that a PPM was forthcoming. But, the PPM was not completed until after FINRA’s investigation of the offering began and well after Brenner had ceased soliciting investors. Hence, the PPM

was not provided to investors. By distributing a variety of documents to investors in each offering, Brenner negligently made untrue statements of material facts or omitted to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, and made statements which were not fair and balanced, and were misleading, exaggerated and unwarranted.

The findings also included that Brenner’s member firm’s WSPs designated him as the principal responsible for ensuring compliance with all procedures relating to private placements, including the due diligence requirements. Brenner, however, was not aware that he was the designated principal under the WSPs and did not have any experience in supervising private placements. Despite the express references in the firm’s WSPs to due diligence requirements for private placements, neither Brenner nor anyone else at the firm conducted the diligence the firm’s WSPs required. Brenner assumed that another principal of the firm had conducted the due diligence of one of the offerings. However, that principal was unaware of the offering and did not conduct any due diligence. Brenner’s review of the offering was limited to talking with the offering’s founder and discussing its business plan with a few people in the medical or pharmaceutical industries for the purpose of understanding the market demand for the self-owned toxicology laboratories.

The suspension is in effect from August 15, 2016, through December 14, 2017.

(FINRA Case #2015046056403)

Source: FINRA, Financial Industry Regulatory Authority, Inc. 2016
Full Disciplinary Reports Available to the public at: www.finra.org