FINRA Sanctions Paulson For Sale of Unregistered Securities
Paulson Investment Company LLC a securities broker dealer headquartered in Chicago Illinois has been censured and fined $50,000.00 by Financial Industry Regulatory Authority (FINRA) based upon findings that the securities broker dealer engaged in the unregistered offer and sale of private placements. Letter of Acceptance Waiver and Consent No. 2018056269003 (Jan. 31, 2020).
According to the AWC, from May of 2017 to April of 2018, interests in six private placement offerings had been sold by Paulson Investment Company. The securities broker dealer claimed that the registration of those private placement interests was not necessary because of regulatory exemptions. FINRA stated that eleven individuals who Paulson Investment Company solicited had invested $4,500,000.00. These individuals did not maintain any substantive relationship with Paulson at the time that they were solicited.
FINRA stated that the securities broker dealer effectuated the distribution of the securities and engaged in activities including due diligence, helping issuers prepare the materials provided to customers, facilitating the execution of placement agent agreements, and selling interests to customers.
FINRA noted that in one case, customers DE and KS both invested in private offerings through Paulson. Both customers maintained no substantive relationship with the securities broker dealer before transactions were effected. Nine other customers had similar experiences. FINRA determined that these interests were generally solicited which constituted the unregistered distribution of securities. FINRA concluded that the securities broker dealer failed to comply with Securities Act of 1933 Section 5 and FINRA Rule 2010.