Texas Firm Fined and Censured by FINRA for Failing to Adopt Suitable Supervisory Systems Regarding Private Placements

The following summation of information was obtained by Soreide Law Group (888-760-6552) from FINRA's Website under "Disciplinary and Other Actions April 2015."

EDI Financial, Inc. (CRD #15699, Irving, Texas)

was censured and fined $100,000 by FINRA for allegedly failing to adopt and implement supervisory systems and procedures reasonably designed to achieve compliance with EDI Financial’s suitability obligations for the solicitation and sale of private placements.

FINRA's findings stated that despite the risk and illiquidity of private placements, EDI Financial did not have written policies or procedures concerning the proportion of a client’s assets that could be allocated to private placements and EDI Financial’s representatives had insufficient written guidance for determining whether and how much to recommend that a particular client invest in a private placement. Also, because EDI Financial lacked adequate systems and procedures for monitoring the proportion of each client’s assets that was invested in private placements, if a client invested in multiple private placements, EDI Financial’s representatives and supervisors could not adequately determine whether the client’s assets were overly concentrated in private placements.

FINRA's findings included that EDI Financial’s WSPs did not provide adequate guidance concerning how due diligence was to be documented, and EDI Financial failed to sufficiently document due diligence conducted on private placements. EDI Financial could not effectively supervise whether adequate due diligence was performed on private placements.

FINRA found that despite EDI Financial’s WSPs requiring switch letters, the firm failed to consistently obtain switch letters when clients switched between mutual funds. This prevented EDI Financial supervisors from confirming that clients received material facts regarding fees and charges incurred by customers from switching investments.

FINRA found that EDI Financial failed to timely provide a complete response to FINRA’s request for documents and information.
(FINRA Case #2012032643701)

Soreide Law Group represents clients nationwide. If you suffered significant financial losses in private placements call a Securities Arbitration Lawyer for a no-cost consultation on how to potentially recover your losses at 888-760-6552.