Newbridge Sanctioned By FINRA For Failure To Supervise
Newbridge Securities Corporation a securities broker dealer headquartered in Boca Raton Florida, and Bruce H. Jordan (Director of Investment Banking), have been censured by Financial Industry Regulatory Authority (FINRA) based upon findings that (1) Newbridge failed to supervise structured products sold to customers of the firm (2) Newbridge failed to supervise non-traditional exchange traded fund sales and (3) Newbridge and Jordan failed to supervise a private placement offering. Letter of Acceptance, Waiver and Consent No. 2016047569601 (Sept. 26, 2019).
According to the AWC, from July of 2013 to September of 2015, a total of nine hundred seventy-six customers had been solicited by Newbridge stockbrokers to invest $96,900,000.00 in structured products. Evidently, $54,900,000.00 in structured notes purchases consisted of non-principal protected structured notes. FINRA stated that there was no supervision system or written supervisory procedures established and implemented by Newbridge with a view towards ensuring that structured product recommendations made by stockbrokers were suitable for the customers.
The AWC stated that there was a system relating to structured product suitability in which compliance personnel created product profiles for each of the structured products offered by the firm. Risks and features of the structured products had been detailed within the product profiles, and restrictions were set forth as to which customers could be sold these products. The AWC revealed that there was no supervision system or written supervisory procedures used by the firm to ensure that the supervisors turned to those product profiles in making suitability assessments. FINRA found that the firm’s conduct in this regard was violative of FINRA Rules 2010, 3110 and National Association of Securities Dealers (NASD) Rule 3010.
Also, the AWC stated that the securities broker dealer failed to supervise sales of non-traditional exchange traded funds effected by the firm’s stockbrokers. Particularly, between July of 2013 and June of 2016, Newbridge failed to enforce its prohibition on non-traditional exchange traded funds being solicited by the firm’s stockbrokers. Evidently, the firm’s surveillance system, which was supposed to detect when non-traditional exchange traded fund sales had been solicited, was deficient and out of date. This resulted in ninety-five transactions being executed which would have normally been prohibited.
The AWC also revealed that there were no systems or procedures utilized by Newbridge for purposes of examining non-traditional exchange traded fund suitability factors including the length of time in which those investments were held in customer accounts. FINRA stated that Newbridge failed to supervise the recommendations stockbrokers made. Fifty-eight of the ninety-five non-traditional exchange traded fund sales that were solicited by stockbrokers had been held in customer accounts for prolonged periods. FINRA found the firm’s supervisory failures in this respect to be violative of FINRA Rules 2010, 3110 and NASD Rule 3010.
FINRA also reported that from 2015 to 2016, 2,282,977.00 had been earned by Newbridge in part through the securities broker dealer being a placement agent for CJS Fund I’s contingent offering. CJS Fund I had been created by three of Newbridge’s stockbrokers through their outside investment adviser. Allegedly, the shares of a fund held by two entities were obtained by CJS Fund I via purchase and sales agreements. Those two entities were subsequently expected to buy another fund who allegedly held restricted shares in companies including Palantir, Lyft and Uber. The AWC stated that $5,800,000.00 worth of CJS Fund I shares had been purchased by eighty customers through Newbridge stockbrokers’ solicitations.
FINRA indicated that there was a lack due diligence by Newbridge on CJS Fund I. Specifically, Newbridge used written supervisory procedures that inadequately addressed the due diligence to be undertaken on the issuers. The Director of Investment Banking, Jordan, was responsible for undertaking due diligence on the offerings but he failed to do so. Newbridge instead depended on CJS Fund I to verify information about the source of CJS Fund I’s shares. There was no information sought by the securities broker dealer concerning the two entities who were party to the purchase and sale agreements. Also, Newbridge failed to verify that CJS fund I actually undertook due diligence.
FINRA found that Newbridge’s neglect for the due diligence process precluded it from having an adequate foundation to conclude that recommendations were appropriate for some of the eighty investors who purchased shares of CJS Fund I at the recommendation of Newbridge stockbrokers; conduct violative of FINRA Rule 2111. Also, FINRA found that Newbridge and Jordan failed to perform due diligence on CJS Fund I and improperly allowed Newbridge to depend on CJS Fund I to conduct due diligence; conduct violative of FINRA Rules 2010 and 3110.