FINRA sanctions Axiom for allegedly ignoring red flags with private placement offering
According to the Financial Industry Regulatory Authority (FINRA), the regulator has reportedly censured and fined Axiom Capital Management $40,000 for allegations that it failed to conduct due diligence on a private placement offering. The firm will reportedly also be required to pay a disgorgement of $7,000 plus interest.
In 2019, Axiom reportedly served as a sub-placement agent for a private placement offering by a Canadian start-up company. When Axiom originally conducted due diligence of the company it purportedly recognized a lawsuit by the federal government against the company’s founder alleging fraud to be a “red flag,” according to FINRA.
According to FINRA, while Axiom recognized this red flag, it allegedly failed to reasonably conduct ongoing due diligence in connection with the lawsuit during the three-month offering period. Instead, the firm reportedly relied almost exclusively on representations by the company, which “minimized the gravity of the lawsuit and its potential effect on the company and its assets,” according to a Letter of Acceptance, Waiver and Consent.
Consequently, Axiom purportedly failed to learn that the company was ordered to place a substantial portion of its assets in receivership and a contempt finding against the company’s CEO.
Axiom was allegedly thus in violation of FINRA rules, by its alleged failure to conduct reasonable ongoing due diligence in connection with the lawsuit, and by recommending the offering to customers without a reasonable basis. In addition, Axiom allegedly failed to establish and maintain a supervisory system, including written procedures, reasonably designed to ensure that the firm conducted reasonable ongoing due diligence during the entire offering period. The firm also reportedly failed to timely file the offering documents with FINRA.
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Tags: Axiom Capital Management, Axiom Capital Management FINRA, Axiom complaints, Axiom private placement offerings, securities fraud attorneys Last modified: December 7, 2022