FINRA Sanctions Signet Securities For Supervisory Failures
Signet Securities, LLC, a wholly owned subsidiary of Signet Capital, focuses on the sale of private placement securities offerings to customers including retail investors in Columbus, Ohio.
According to public documents on October 3, 2024, The Financial Industry Regulatory Authority (FINRA) has reportedly censured and fined Signet Securities for supervisory failures related to its sale of private placement securities.
From June 30, 2020, onward, Signet Securities reportedly failed to enforce written policies and maintain a proper supervisory system to comply with Regulation Best Interest (Reg BI). The firm allegedly recommended $140 million in Regulation D private placement sales, but its due diligence was inadequate, relying solely on documents from the issuer.
Additionally, Signet Securities failed to supervise outside business activities (OBAs) and did not deliver the required customer relationship summary (Form CRS) to existing customers, violating FINRA rules and the Exchange Act. The firm is accused of breaching FINRA Rules 3110, 3270.01, and 2010, as well as Section 17(a)(1) and Rule 17a-14 of the Exchange Act.
Risks of Reg D Private Placements
Investing in Regulation D (Reg D) private placements carries significant risks, starting with illiquidity. Unlike publicly traded securities, private placements are not easily sold or traded on a secondary market, often requiring investors to hold their positions for years. Additionally, Reg D offerings lack the stringent disclosure requirements of public companies, providing less transparency and making it difficult for investors to evaluate the issuer’s financial health and the overall risk of the investment.
Another major risk is the high potential for loss. Many Reg D private placements involve speculative ventures, such as startups or complex real estate projects, which have a high failure rate. Investors could lose part or all of their capital if the business or project underperforms. As a result, these investments are generally suitable only for those who can afford to take on substantial risk and who understand the importance of thorough due diligence.
Signet Securities Fiduciary Duty
Investment advisors have a fiduciary duty to act in the best interest of their clients. The Investment Advisers Act of 1940 enforces this duty by requiring that advisors make decisions that serve their clients’ best financial interests, with full transparency.
FINRA member firms must have supervisory systems in place to prevent and detect broker misconduct. This rule emphasizes that firms must supervise advisors’ activities to ensure they do not violate client trust or regulatory standards.
Broker dealers are required to supervise their representatives. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.
Free Consultation
If you have suffered losses with Signet Securities, the securities attorneys at The White Law Group may be able to help you. For a free consultation to learn about your options, please call The White Law Group at 888-637-5510.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.
Last modified: October 4, 2024
