Seeking Alpha

Robert W Pearce's  Instablog

Robert W Pearce
Send Message
Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • E. S. FINANCIAL SERVICES CENSURED AND FINED FOR MISREPRESENTING COMMERCIAL PAPER PROGRAM 0 comments
    Apr 1, 2013 12:42 PM

    E.S. Financial Services, a brokerage firm based in Miami, Florida, submitted a letter of acceptance, waiver, and consent in which the firm consented to the entry of Financial Industry Regulatory Authority (FINRA) findings that it served as a placement agent and solicited certain non U.S. persons to invest in a commercial paper program offered by an affiliate outside the United States. At various times, in connection with the firm's sales of the commercial paper, the firm provided a customized document to each of the customers or prospective customers, in which the firm included the program in the cash portion of the customer's portfolio alongside U.S. Treasuries and other commercial paper products; labeled the program within investment options described as conservative; and described the main objective of investing in this category as a way to reduce global risk as well as to generate income. The findings stated that the firm recommended investing in the program over U.S. Treasuries or other commercial paper if the customer wanted a higher return. Contrary to the description of the program, it was neither a cash category investment, nor was it a conservative, low-risk investment. The firm was censured and fined $200,000 by FINRA.

    Commercial paper is an unsecured, short-term debt instrument issued by a corporation, usually for the financing of accounts receivable, inventories, and meeting short-term liabilities. Maturities are typically less than 270 days, and the debt is usually issued at a discount, reflecting prevailing market interest rates. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt ratings will find buyers without having to offer a substantial discount or higher interest rate. Commercial paper does not need to be registered with the Securities and Exchange Commission (SEC) as long as it matures before nine months (270 days), making it a very cost-effective means of financing. The proceeds from this type of financing can only be used on current assets and are not allowed to be used on fixed assets, such as a new plant, without SEC approval.

    FINRA stated that E.S. Financial Services' representations amounted to false, exaggerated, or unwarranted statements in the investment program's materials. The findings also stated that the firm posted an information memorandum on a password-protected website accessible to customer that did not adequately detail certain risks associated with investing in the program. In addition, FINRA stated that the firm failed to conduct adequate due diligence relating to its sales of the commercial paper program, and failed to adopt, maintain and enforce adequate written supervisory procedures (WSPs) pertaining to its sale of the investments until almost four years after it began selling the investments. FINRA also included that the firm failed to adopt, maintain and enforce written due diligence procedures tailored to its sale of the investments. Although all of the investments were repaid on a timely basis at maturity, the firm's failure to implement written due diligence procedures led it to fail to conduct a reasonable investigation concerning various matter regarding the investments

    Have you suffered losses in your E.S. Financial Services brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against Deutsche Bank Securities stockbrokers who may have engaged in misconduct and caused investors losses.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

Back To Robert W Pearce's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.