Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2009
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
February 2009 - View all for this month
G.C. Andersen Partners Capital, LLC and Bruce Neal Orr (Principal)
AWC/2007007256801

Acting through Orr, the Firm participated in private placements that were contingent upon receiving a minimum and/or a maximum of investor funds and during the offering periods, the firm failed to transmit investor funds to a bank that had agreed, in writing, to hold such funds in escrow for the investors until the offering contingency was met but, instead, investor funds were held in an account over which Orr had control as escrow agent. As a result of the firm’s control over the funds held in connection with the private placements, it was deemed to be in control of customer funds, which resulted in an increase in its net capital requirement, but the firm was found to be deficient in its net capital while conducting a securities business. 

On the firm’s behalf, Orr failed to maintain a Cash/Checks Received and Forwarded Blotter, or an equivalent record to reflect the receipt and/or forwarding of funds as required by SEC Rule 17a-3. The Firm did not have an adequate email retention system and therefore failed to adequately preserve emails as required. The Firm failed to establish and maintain a supervisory system reasonably designed to ensure compliance with applicable laws, rules and regulations in connection with the private placements conducted by the firm, and the firm failed to retain a written record of the dates upon which reviews and branch office inspections were conducted. 

G.C. Andersen Partners Capital, LLC: Censured; Fined $65,000

Bruce Neal Orr (Principal): Censured: Fined $15,00

Bill Singer's Comment
The old bug-a-boo of not properly escrowing private placement funds just never seems to die.  Once again, you must keep investor funds in a proper escrow account until all contingencies are met, or return those funds in accordance with the offering's terms.  This violation frequently snowballs into a Net Cap problem because the typical exemption does not countenance an introducing firm holding customer funds or securities (which is often the default mode for a failed escrow account).
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