Pasadena, California based GlobaLink Securities, Inc. and Junhua Michael Liao submitted a Letter of Acceptance, Waiver and Consent in which the firm and Mr. Liao consented to, but did not admit to or deny, the described sanctions and the entry of the Financial Industry Regulatory Authority's (FINRA) findings that the firm, acting through Mr. Liao, executed an agreement to market and sell a Regulation D offering of promissory notes for Medical Capital Holdings Inc. (Med Cap) without performing adequate due diligence. FINRA's findings stated that the firm sold $1,260,049 of the Med Cap notes to some customers, and these sales generated approximately $56,700 in commissions for the firm. The findings also stated that as the firm's chief compliance officer and president throughout the relevant period, Mr. Liao was responsible for ensuring that the firm established, maintained, and enforced a supervisory system and written supervisory procedures (WSPs) reasonably designed to achieve compliance with applicable laws, rules, and regulations.
FINRA included findings that the firm maintained WSPs pertaining to the sales of private placements, but the WSPs were inadequate in that they lacked specifics concerning how the firm would conduct due diligence, process private placement transactions, ensure that a Regulation D product was suitable for investors, and document the firm's decisions and actions regarding private placement transactions. As a result of the firm's deficient supervisory system and WSPs, FINRA found the firm failed to conduct adequate due diligence on the offering. Further, that the failure to conduct due diligence prevented the firm and Mr. Liao from learning that the issuer had experienced payment problems on earlier note offerings and thus, the private placement memorandum (PPM) misrepresented the issuer's past performance. GlobaLink Securities was fined $20,000 jointly and severally with Mr. Liao. Mr. Liao, of San Gabriel, California, was also suspended from association with any FINRA member in any principal capacity for one month - the suspension was in effect from June 3, 2013 through July 2, 2013.
Broker-dealers must establish and implement a reasonable supervisory system and WSPs governing adequate due diligence of investments they intend to market and sell. If broker-dealers do not establish such systems and procedures, they may be liable to investors for damages. Therefore, investors who have suffered damages in the Med Cap private placement can bring forth claims to recover their investment losses from GlobaLink Securities, which should have performed adequate due diligence prior to offering and selling the investment to its customers.
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.