Haywood Securities (USA) Inc. Review: Private Placement Sales and FINRA Sanctions

Haywood Securities (USA) Inc. Review: Private Placement Sales and FINRA Sanctions

The White Law Group reviews the regulatory history of Haywood Securities (CRD #42072).

Investors considering private placements or other alternative investments should understand the regulatory history of the brokerage firm recommending those products. Haywood Securities (USA) Inc. has faced regulatory scrutiny in connection with its private placement sales practices, including a significant 2023 disciplinary action by Financial Industry Regulatory Authority (FINRA).

Below is an overview of the allegations, findings, and what they may mean for investors.

2023 FINRA Sanctions Related to Private Placements

In 2023, FINRA reportedly sanctioned Haywood Securities (USA) Inc. in connection with its recommendations of private placements to U.S. customers.

According to FINRA’s findings:

• From September 2014 through the present, Haywood USA recommended 134 sales totaling nearly $11 million

• These sales involved 53 different private placements

• The firm allegedly failed to conduct reasonable due diligence on the issuers and offerings before recommending them to retail customers

Private placements are generally considered complex, high-risk, and illiquid investments. Because they are not registered with the SEC in the same way as publicly traded securities, broker-dealers have an obligation to conduct meaningful due diligence before recommending them.

FINRA found that:

• From September 2014 through June 30, 2020, the firm failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with FINRA Rule 2111 (Suitability), in violation of FINRA Rules 3110 and 2010 and NASD Rule 3010.

• From June 30, 2020 to the present, the firm failed to establish, maintain, and enforce a supervisory system reasonably designed to comply with Regulation Best Interest (Reg BI), in violation of FINRA Rules 3110 and 2010.

These findings suggest that the firm’s supervisory systems were not reasonably designed to ensure that private placement recommendations met required standards of suitability and best interest.

Why Due Diligence Matters in Private Placements

Private placements often include investments such as:

• Oil and gas offerings

• Real estate development projects

• Equipment leasing programs

• Pre-IPO companies

• Alternative income funds

These investments typically carry:

• Higher risk of loss

• Limited liquidity

• Limited transparency

• Valuation uncertainty

Brokerage firms are expected to conduct independent and reasonable investigations of the issuer, the management team, the financial projections, and the underlying business model before recommending such offerings.

Failure to perform reasonable due diligence can expose investors to offerings that may be unsuitable, overly risky, or inconsistent with their financial objectives.

Regulation Best Interest (Reg BI) Obligations

Since June 30, 2020, broker-dealers have been required to comply with Regulation Best Interest, adopted by the U.S. Securities and Exchange Commission (SEC).

Reg BI requires that:

• Recommendations be in the best interest of the retail customer

• Firms address conflicts of interest

• Firms establish and enforce supervisory systems reasonably designed to achieve compliance

According to FINRA, Haywood’s supervisory systems after June 30, 2020 were not reasonably designed to ensure compliance with Reg BI in connection with private placement recommendations.

Potential Investor Concerns

Investors who purchased private placements through Haywood Securities (USA) Inc. may wish to evaluate:

• Whether the investment was consistent with their risk tolerance

• Whether they were fully informed of the risks and illiquidity

• Whether adequate due diligence was conducted on the issuer

• Whether the recommendation complied with suitability or Reg BI standards

Private placement losses can be substantial, particularly when offerings fail to generate projected returns or become illiquid.

Can Investors Recover Losses?

Investors who suffered losses in private placements recommended by Haywood Securities (USA) Inc. may have the option to pursue recovery through FINRA arbitration.

Potential claims may involve:

• Failure to conduct reasonable due diligence

• Unsuitable investment recommendations

• Failure to comply with Regulation Best Interest

• Supervisory failures

Each case depends on the specific facts, including the investor’s objectives, financial profile, and the nature of the recommendation.

Free Consultation with The White Law Group

With offices in Seattle, Washington and Chicago, Illinois, The White Law Group represents retail investors nationwide in cases involving broker misconduct, supervisory failures, and private placement losses.

If you have concerns regarding Haywood Securities complaints, lawsuits, or regulatory sanctions, or if you experienced losses in private placements recommended by the firm, you may be entitled to recover your investment losses.

Contact The White Law Group today for a free consultation to discuss your potential recovery options through FINRA arbitration.