FINRA Imposes $50,000 Fine on Chicago-based Paulson Investment Company Resolving Violations of Industry RulesWednesday, February 26, 2020
The Financial Industry Regulatory Authority (FINRA) Department of Enforcement recently approved a Letter of Acceptance, Waiver and Consent (AWC) to resolve allegations of securities industry violations it made against Paulson Investment Company, LLC. Paulson is an investment-banking firm headquartered in Chicago, Illinois with approximately 60 registered representatives and nine branch offices.
FINRA claims in the AWC that between May 2017 and April 2018, Paulson sold six private placement offerings claiming exemption from registration under Rule 506 of Regulation D, which, among other things, dictates that an issuer cannot sell to more than 35 non-accredited investors and cannot use “general solicitation” or advertising to market its securities. During this time, Paulson solicited 11 separate individuals to invest approximately $4.5 million in the offerings. However, the firm began participating in this offering well before it established relationships with these individuals. Although the firm eventually established a substantive relationship with all individuals, the relationship did not exist prior to the firm’s participation in the offerings, as required by the FINRA Rule.
According to the AWC, Paulson violated FINRA Rule 2010 for acting in contravention of Section 5 of the Securities Act of 1933. Without admitting or denying the allegations made against it, Paulson consented to the imposition of a censure and $50,000 fine as resolution. FINRA approved the AWC on January 31, 2020.
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