Cova Capital Partners Allegedly Failed to Perform Due Diligence on Investments
According to public documents, The Financial Industry Regulatory Authority has reportedly sanctioned Cova Capital Partners LLC with a censure and a $30,000 fine for regulatory failures.
Cova Capital Partners, of Syosset, New York, is a FINRA-registered broker dealer. The firm’s business includes private placements, private investments in public equity, and retail sales of equity securities.
According to FINRA, between June 2018 and December 2021, Cova allegedly recommended three private placements to retail customers without conducting due diligence to form a reasonable basis to believe that the offerings were suitable for or in the best interests of at least some investors.
Offering 1 (2018–2020): Cova sold over $2 million in pre-IPO shares of Company A but failed to verify that the issuer actually had rights to the shares or to assess the markups charged.
Offering 2 (2019–2021): Cova sold over $1.7 million in another private placement without investigating the issuer’s CEO, who had a history of regulatory violations.
Offering 3 (2021): Cova sold over $9 million in pre-IPO shares of Company B but failed to investigate SEC charges against individuals linked to the fund sourcing the shares.
Cova Capital Partners: Due Diligence
By failing to perform reasonable due diligence, Cova purportedly violated Exchange Act Rule 15/-l(a)(1) and FINRA Rules 2111 and 2010.
Additionally, between June 2018 and December 2023, Cova purportedly failed to establish, maintain, and enforce a supervisory system, including written policies and procedures, reasonably designed to achieve compliance with its suitability and best interest obligations in connection with its sale of private placement offerings. As a result, Cova allegedly willfully violated Reg Bi’s Compliance Obligation and violated FINRA Rules 3110 and 2010. Cova also reportedly violated FINRA Rules 5123 and 2010 by failing to make a timely filing in connection with one private placement offering.
Regulation Best Interest
As of June 30, 2020, broker-dealers and their representatives must comply with Regulation Best Interest (Reg BI). Under this rule, they must act in the best interest of retail customers when recommending securities transactions or investment strategies, without prioritizing their own financial interests.
Care Obligation requires them to exercise diligence, care, and skill in understanding the risks, rewards, and costs of recommendations. What qualifies as “reasonable diligence” depends on factors like the complexity and risks of the security. They must also have a reasonable basis to believe a recommendation is suitable for at least some retail investors.
How to Recover your Investment Losses
If an advisor makes an unsuitable investment recommendation, the firm can be held liable if it failed to detect or prevent the wrongdoing due to inadequate supervision. Firms that fail to supervise their advisors, can be held responsible for investment losses in a Financial Industry Regulatory Authority (FINRA) lawsuit.
Free Consultation
If you have suffered investment losses with Cova Capital Partners, the securities attorneys at the White Law Group may be able to help you by filing a FINRA lawsuit. Please call our offices at (888) 637-5510 for a free consultation. We represent investors in all 50 states including New York.
National Securities Attorneys
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.
Our attorneys have recovered millions of dollars from many broker-dealers across the country.
The Financial Industry Regulatory Authority (FINRA) operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute.
Last modified: February 24, 2025
