Capital Financial Faces Cease-and-Desist Order Over Provident, Medical Capital Private Placements
Yet another broker is facing the wrath of the Securities and Exchange Commission (SEC) over sales of private placements in Provident Royalties and Medical Capital Holdings.
This time it’s Capital Financial Services feeling the heat, with the SEC alleging that the independent broker/dealer failed to conduct reasonable investigations into the investments it marketed and pitched to investors. Meanwhile, Capital Financial collected fees for due diligence from investors without adequately researching the instruments they sold.
According to the SEC’s cease-and-desist order, Capital Financial Services sold $63 million of the private placements in question from 2006 to 2009. In July 2009, the SEC charged Provident Royalties with fraud.
Capital’s reps received an 8% commission – or $5 million – on the Provident deals.
In addition to Provident Royalties, Capital Financial also sold $100 million of private placements issued by Medical Capital Holdings. It, too, has been charged with fraud by the SEC.
“Capital Financial never conducted independent verification of any of the offering materials provided by Provident,” the SEC said in its cease-and-desist order against Capital Financial Services. It “also never received audited or even unaudited financial statements for any of the Provident offerings. The only financial information Capital Financial received regarding Provident was an unaudited consolidated balance sheet review.”