简体中文
繁體中文
English
Pусский
日本語
ภาษาไทย
Tiếng Việt
Bahasa Indonesia
Español
हिन्दी
Filippiiniläinen
Français
Deutsch
Português
Türkçe
한국어
العربية
Abstract:The Financial Industry Regulatory Authority (FINRA) has imposed significant fines on Investment Network, Inc. (INI) and its CEO, Gary L. Arnold, for a series of regulatory violations connected to the sale of pre-initial public offering (pre-IPO) funds between October 2020 and May 2021.
The Financial Industry Regulatory Authority (FINRA) has imposed significant fines on Investment Network, Inc. (INI) and its CEO, Gary L. Arnold, for a series of regulatory violations connected to the sale of pre-initial public offering (pre-IPO) funds between October 2020 and May 2021.
Deceptive Business Practices
INI misled investors about its compensation structure, falsely claiming it would only receive a 10% sales commission for its involvement in the private placement offerings. However, INI had secretly agreed to an additional 5% in selling compensation and half of the carried interest from the offerings. This hidden compensation agreement, which was never disclosed to investors, constituted a violation of FINRA Rule 2010 and Section 17(a)(3) of the Securities Act of 1933.
Failure to Meet Regulation Best Interest (Reg BI) Requirements
INI also willfully violated Reg BI by failing to meet the standards set forth in its Disclosure and Care Obligations. The firm did not ensure that the offerings were in the best interests of its customers, failing to confirm the existence of pre-IPO shares and the reasonableness of the issuers prices. This negligence violated Exchange Act Rule 15l-1 and FINRA Rule 2010.
Lack of Due Diligence and Supervision
In addition to the deceptive practices, INI failed to establish a reasonable supervisory system to ensure compliance with regulatory obligations. INI and its CEO did not enforce proper written supervisory procedures (WSPs) for private placement offerings. This led to further violations of Reg BIs Compliance Obligation and FINRA Rules 3110 and 2010.
Customer Identification and Filing Failures
INIs violations extended to failures under the Bank Secrecy Act, as the firm lacked an adequate Customer Identification Program (CIP) when opening accounts for the offerings. Furthermore, the company failed to file necessary documentation with FINRA, violating FINRA Rules 3310(b), 5123, and 2010.
Conclusion
FINRAs action against Investment Network and Gary L. Arnold underscores the importance of transparency, due diligence, and adherence to regulatory standards in the financial industry. By failing to disclose compensation agreements, conduct proper due diligence, and establish a supervisory system, INI and its CEO breached their obligations to both investors and regulators, leading to substantial fines and penalties. These violations serve as a reminder that firms must prioritize the best interests of their clients and maintain strong compliance programs to avoid legal and regulatory consequences.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
A recent allegation against STP Trading has cast doubt on the firm's business practices, highlighting the potential risks faced by retail traders in an increasingly crowded and competitive market.
Cross-border payments are now faster, cheaper, and simpler! Explore fintech, blockchain, and smart solutions to overcome costs, delays, and global payment hurdles.
The UK Financial Conduct Authority (FCA) has issued a public warning regarding a fraudulent entity impersonating Admiral Markets, a legitimate and authorised trading firm. The clone firm, operating under the name Admiral EU Brokers and the domain Admiraleubrokerz.com, has been falsely presenting itself as an FCA-authorised business.
A 57-year-old Malaysian man recently fell victim to a fraudulent foreign currency investment scheme, losing RM113,000 in the process. The case was reported to the Commercial Crime Investigation Division in Batu Pahat, which is now investigating the incident.