Broker-Dealer Settles FINRA Charges For Mishandling Escrow Account – Finance and Banking

A broker-dealer and its general securities principal settled FINRA charges for deficient
escrow account procedures while acting as a placement agent for a
contingency offering.

In a Letter of Acceptance, Waiver and Consent, FINRA found that,
while acting as a placement agent for an issuer, the broker-dealer
and its principal failed to (i) deposit investor funds with a bank
instead using a law firm as the escrow agency, (ii) use the
standard escrow agreement per its procedures and (iii) properly
calculate the required minimum contingency by including a non-bona
fide investment to meet the threshold. FINRA also found that, when
acting as a placement agent for another issuer, the broker-dealer
and principal failed to obtain timely positive consent from
investors to extend or return funds when the offering did not meet
its minimum contingency.

As a result of its findings, FINRA determined that the
broker-dealer and principal violated Exchange Act Section 15(c)(2) (“Registration and
Regulation of Brokers and Dealers”), SEA Rules 15c2-4 (“Transmission or Maintenance
of Payments Received in Connection with Underwritings”) and 10b-9 (“Prohibited Representations in
Connection with Certain Offerings”), and FINRA Rule 2010 (“Standards of Commercial Honor
and Principles of Trade”).

FINRA also found that the broker-dealer’s written procedures
failed to provide necessary guidance as to escrow procedures. As a
result, FINRA determined that the broker-dealer violated FINRA
Rules 3110(a) and 3110(b) (“Supervision” and
“Written Procedures”).

To settle the charges, the broker-dealer agreed to a (i) censure
and (ii) $30,000 fine. The principal consented to a (i) one-month
suspension from acting as principal for any FINRA member and (ii)
$5,000 fine.

Primary Sources

1. FINRA AWC: Newbridge Securities Corporation and
   Bruce Howard Jordan

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