According to FINRA, Fusion Analytics Securities LLC was expelled from FINRA membership for engaging in securities fraud in connection with bond offerings.
The firm sold bonds for a company while knowing that the SEC had previously found that an affiliate company and its promoter had misled investors and diverted millions of dollars. Despite this disciplinary history, the firm agreed to sell bond offerings purportedly to raise money for building a power plant. However, the firm made material misrepresentations and omissions to potential investors.
For the first bond offering, the firm disseminated false and misleading statements that failed to disclose the SEC order and findings about the promoter's prior misconduct. The firm also made misleading statements about the risks and anticipated revenue of the project, as well as false statements regarding the progress of the offering. For the second bond offering, the firm similarly failed to disclose critical information, including that the issuer was in financial distress, late on interest payments, and in violation of debt covenants.
In total, the firm raised approximately $1.8 million from customers through the bond offerings and generated $146,000 in commissions. The firm also failed to conduct reasonable due diligence despite numerous red flags, which is required before recommending investments to customers.
Compounding these violations, the firm provided false information to FINRA during its investigation, initially reporting only $80,000 in bond sales when it had actually sold at least $600,000, and later $950,000 in total.
Investors should recognize that due diligence is not optional—it is a regulatory requirement. Firms must investigate the offerings they sell, especially when red flags exist. The failure to disclose material adverse information, such as prior SEC enforcement actions and financial distress, is securities fraud. Investors should always research both the investment and the firm selling it, and be wary of private placements and pre-IPO offerings that promise high returns.
