A Colorado firm specializing in private placement recommendations for retail investors failed to disclose reps’ legal and disciplinary history on its Form CRS, according to FINRA.
The settlement with Parsonex Capital Markets is the regulator’s latest disciplinary action focused on the mandated client relationship summary that was approved by the SEC in tandem with Regulation Best Interest in 2020.
Without admitting or denying the findings, the firm agreed to a censure and $10,000 fine. The firm registered with FINRA in 2014, with headquarters in Englewood, Colo., along with one branch office and six registered reps.
The firm mainly acted as a “managing dealer or placement agent” for private placements, with a focus on real estate development and qualified opportunity zones. In March, the group broke ground on its third opportunity zone, located in Grand Junction, Colo.
According to FINRA, Parsonex erred in the section of Form CRS requiring firms to disclose if any of their “financial professionals have legal or disciplinary history,” including criminal histories, regulatory actions, civil judicial actions and specified financial events, including bankruptcies, judgments and liens.
But although four of the firms’ registered reps (including its chief financial officer) did have prior legal or disciplinary histories, Parsonex responded “no” to the aforementioned prompt on its Form CRS. This remained the case until Feb. 9, 2023, when Parsonex updated its Form CRS to state that while the firm itself had no disciplinary history, some of its representatives did.
FINRA also found that Parsonex didn’t disclose that one of its affiliate firms also had a disciplinary history with the SEC.
In February, Parsonex Enterprises purchased E. Magnus Oppenheim & Co., a New York-based investment advisory firm. But in March, the SEC settled charges with E. Magnus Oppenheim, alleging the firm copied another firm’s compliance manual wholesale without tailoring it to its own business, and also fell short on its best execution requirements. Parsonex had to update its Form CRS within 30 days of the SEC’s order, but it didn’t do so, according to FINRA.
Officials from Parsonex did not respond to requests for comment prior to publication.
FINRA settled numerous charges against registered firms this year over alleged Form CRS violations, including a group of five b/ds in May of this year (American Wealth Management, Highlander Capital Group, Axos Invest, Harpeth Securities and DMK Advisor Group).
FINRA also barred Monmouth Capital Management from the industry in June, for violating Reg BI’s Care Obligation and for allegedly making “false and misleading disclosures” on its Form CRS.
