According to FINRA, Concorde Investment Services, LLC was censured, fined $175,000, and ordered to pay disgorgement of $58,278 plus interest for acting in contravention of Section 5 of the Securities Act by selling unregistered securities without an applicable exemption.

The firm sold three private placement offerings claiming exemption from registration under Rule 506(b) of Regulation D, without having established substantive relationships with prospective investors prior to its participation in those offerings or otherwise demonstrating the absence of a general solicitation. The sales totaled approximately $5.5 million, and the firm received $58,278 in commissions.

FINRA found that the firm's supervisory system, including its written supervisory procedures, was not reasonably designed to achieve compliance with the Securities Act and FINRA rules related to general solicitation of private placement offerings. The firm's surveillance system was not reasonably designed to detect improper general solicitations. Firm representatives sent mass emails marketing the offerings to hundreds of recipients, which were red flags of potential general solicitation, yet the firm approved the content without verifying that it had pre-existing, substantive relationships with all recipients.

Investors should understand that Rule 506(b) private placements are restricted to investors with whom the issuer or broker-dealer has a pre-existing, substantive relationship, and general solicitation is prohibited. This restriction helps ensure that only sophisticated investors who understand the risks are solicited for these unregistered offerings. When firms violate these rules, they may expose unsuitable investors to high-risk investments.