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.

Cambridge Legacy Securities, L.L.C. Oran Ben Carroll (Principal), and Russell Kent Childs (Principal)
AWC/2007010684401

Acting through Carroll, its president and registered principal, the Firm failed to adequately implement a supervisory system designed to achieve compliance with applicable securities laws and regulations; specifically, the firm and Carroll failed to implement an adequate system to supervise a branch office’s activities in light of deficiencies identified during branch audits, and failed to appoint a properly qualified principal to supervise the branch office’s activities.

The Firm allowed Carroll and Childs to accept, and they did accept, a gift and/or gratuity in excess of $100 from the president and general partner of an entity that offered an alternative investment product, and Childs sold almost $6 million of that product to customers at the firm’s branch office.

The Firm failed to properly maintain its email communications and, acting through Carroll, failed to have a procedure in place to ensure that his own email, which was designated as legal and confidential, was properly maintained and reviewed. The Firm failed to establish and maintain an adequate supervisory system in the areas of internal communications and correspondence.

The Firm charged both commissions and advisory fees on transactions in alternative investment products whose offering documents specifically prohibited such activity.

Childs

• charged customers commissions, in the amount of $434,589.03, and an annual percentage-based advisory fee on transactions in alternative investments; and
• made unsuitable recommendations to customers and had no reasonable basis for believing that his recommendations of nonliquid alternative investments were suitable for the customers in light of their age, financial needs, annual income, liquid net worth and risk tolerance.

Cambridge Legacy Securities, L.L.C.: Censured, Fined $50,000; Ordered to pay $21,864.74, plus interest, in restitution to customers; If the firm fails to provide proof of restitution within 15 days, it shall be immediately suspended from FINRA membership until proof has been provided

Oran Ben Carroll (Principal): Fined $25,000; Suspended 3 months in Principal only capacity

Russell Kent Childs (Principal): Fined $25,000; Ordered to pay $412,724.28, plus interest, in restitution to customers;Suspended 9 months in all capacities; If Childs fails to provide proof of restitution within 15 days, he shall be immediately suspended from association with any member in any capacity until proof has been provided

Tags: Supervision  Supervisory System  Gifts    Email