Cape Securities Inc Fined $145K

Cape Securities Inc, a Georgia-based broker/dealer, has been censured by the Financial Industry Regulatory Authority (FINRA) and ordered to pay $145,072.62 in partial restitution, plus interest. This was for failing to comply with Regulation Best Interest (Reg BI) supervision failures related to GWG L Bond and NT-ETP recommendations. Additionally, there were repeated failures to respond to regulatory information requests, according to a recent article in Leap Rate.

FINRA describes Reg BI as the SEC's Regulation Best Interest under the Securities Exchange Act of 1934.  It establishes a "best interest" standard of conduct for broker/dealers and associated persons. This applies when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities, including recommendations of types of accounts. FINRA states that as part of the rulemaking package, the SEC also adopted new rules and forms. These require broker/dealers and investment advisors to provide a brief relationship summary, Form CRS, to retail investors.

According to the FINRA report, the sanctions outlined in a Letter of Acceptance, Waiver, and Consent (AWC) dated 05/08/2026, stem from violations from July 2020 through March 2025. FINRA found that Cape Securities allegedly failed to establish a supervisory system which included written supervisory procedures that were reasonably designed to achieve compliance with Reg BI. Specifically, Reg BI requires broker/dealers to act in the best interest of retail customers.

The Leap Rate article states that Cape Securities Inc allegedly failed to adequately supervise representatives who recommended GWG L Bonds to six retail customers. Five of whom were seniors with moderate risk tolerances which resulted in up to 43% of those customers’ liquid net worth concentrated on the high-risk, unrated alternative investment. Additionally, GWG Holdings subsequently defaulted on its L Bonds and filed for bankruptcy in April 2022.

Cape Securities Inc also allegedly failed to supervise recommendations of leveraged, daily-reset non-traditional exchange-traded products (NT-ETPs) to four retail customers, who held the complex instruments for up to 693 days and incurred $15,072.62 in realized losses. In addition, FINRA found Cape Securities failed to timely respond to eight Rule 8210 information requests, materially delaying the regulatory investigation according to the Leap Rate article.

Cape Securities Inc has been a FINRA member since 1976 and operated approximately 20 registered representatives across eight branches.  In March of 2026, they filed to terminate its FINRA registration. No fine was imposed, given the firm’s financial condition and pending withdrawal.

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