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Robert W Pearce
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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
  • IMS SECURITIES CENSURED AND FINED DUE TO VARIOUS SECURITIES INDUSTRY VIOLATIONS 0 comments
    Sep 5, 2013 2:13 PM

    IMS Securities, a Houston, Texas based brokerage firm, has consented to Financial Industry Regulatory Authority (FINRA) findings that it registered a number of wholesale representatives, but did not shape its supervisory system to address its new wholesale business in a way that was reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules. FINRA's findings stated that although supervising wholesale representatives was different than supervising retail representatives, the firm did not revise its written supervisory procedures (WSPs) or implement any procedures tailored to supervising the wholesale representatives until almost four years after hiring them. Also, FINRA's findings stated that the firm sold a wide range of securities products, including privately-traded real estate investment trusts (REITs) and direct participation plans (DPPs), but the firm did not have sufficient WSPs outlining its procedures for assessing them.

    A REIT is a company that owns, and in many cases, operates income-producing real estate. REITs own properties ranging from office and apartment buildings to warehouses, hospitals, shopping centers, and hotels. Some REITs also engage in financing real estate. REITs were designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.

    A DPP is an investment opportunity that allows investors to participate in the profits and tax avoidance of some underlying business. Generally speaking, DPPs invest in real estate or energy products. The concept is to allow investors to participate in certain tax benefits usually available only to corporations, such as depreciation deductions. However, the United States government has curtailed many of the tax benefits available to DPPs. The investment will made up of shares of a partnership, an S corporation, a limited liability company, or any other entity that files an informational return with the IRS but does not itself have any taxable income or deductible losses.

    In addition, FINRA's findings mentioned that IMS Securities failed to conduct annual audits at two of its OSJ branch offices one year. FINRA also found that the firm's wholesale representatives used external email addresses to send communications related to its securities business, and the firm failed to store these emails. Moreover, FINRA stated that for nearly two years, the firm failed to adequately maintain purchase/sales blotters and checks received/forwarded blotters, which lacked certain required information. Therefore, the firm failed to maintain blotters reporting a daily record of all purchases and sales of securities, all receipts and disbursements of cash, and all other debits and credits.

    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. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

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