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Florida Business, Whistleblower, & Securities Lawyers / Blog / FINRA / FINRA Censures and Fines CapWest Securities

FINRA Censures and Fines CapWest Securities

The Financial Industry Regulatory Authority (“FINRA”) has censured and fined CapWest Securities, Inc. (“CapWest”) $175,000 in connection with the firm’s communications to the public regarding tenants-in-common interests (“TICs”).

According to FINRA, it found that CapWest failed to disclose the risks involved with investments in TICs, such as the lack of liquidity and the potential loss of capital; the existence of Internal Revenue Code tax deferral restrictions; and the fact that the costs to maintain the property may erode the tax benefits.

FINRA also found the CapWest’s written communications to the public about TICs failed to explain repeatedly used terms such as “Section 1031 Exchanges”, “cap rates” and “cash-on-cash returns” as they should have.

In addition, FINRA stated that CapWest’s use of cash-on-cash flow projections, describing TIC investments as “typical”, and stating the returns that may be earned by a hypothetical investor, violated the prohibition against predicting or projecting performance.

FINRA also found that CapWest failed to implement an adequate supervisory system in connection with the review of the firm’s advertising and sales literature, resulting in the approval, and dissemination to the public, of communications promoting TICs that did not meet the standards of FINRA’s advertising rules.

The sanctions are not in effect pending review of the decision by the National Adjudicatory Council.

The Florida securities lawyers at Rabin Kammerer Johnson represent investors nationwide in FINRA arbitration matters. Investors nationwide who have incurred recoverable investment losses due to specific failures by stockbrokers and brokerage firms, and who may have a FINRA arbitration claim, may contact the Florida securities lawyers at Rabin Kammerer Johnson for a free and confidential consultation by calling toll free at 877.915.4040.

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