According to FINRA, Greenbird Capital, LLC, a Boca Raton, Florida-based broker-dealer, was censured and fined $50,000 for lacking reasonable systems to supervise private placement solicitations and for failing to comply with telemarketing rules.
Private placements sold under Rule 506(b) of Regulation D generally prohibit general solicitation—meaning firms cannot advertise these offerings to the public. Instead, firms must have pre-existing, substantive relationships with prospective investors before soliciting them.
FINRA found that Greenbird Capital's written procedures did not prohibit general solicitation of private placement offerings and provided no guidance on what constitutes a pre-existing, substantive relationship. The firm had no system to document when it established substantive relationships with prospective investors or to confirm such relationships existed before solicitation.
The result was significant: registered representatives made hundreds of thousands of calls to prospective investors without a reasonable system to ensure substantive relationships were established beforehand.
The firm also failed to comply with FINRA's telemarketing rules. Greenbird Capital had no system to monitor outbound calls against the national do-not-call list. While a principal occasionally checked whether representatives called customers during permitted hours, the firm did not specify when or how often such reviews should occur.
Following the investigation, Greenbird Capital implemented a pre-existing relationship form, revised its written supervisory procedures, and stopped engaging in cold calling.
This case highlights important investor protections. The prohibition on general solicitation for certain private placements exists because these securities are not registered and carry significant risks. The requirement for pre-existing relationships helps ensure that only investors with whom the firm has meaningful connections are offered these investments.
If you receive unsolicited calls offering private investment opportunities, exercise caution and verify the caller's credentials through FINRA BrokerCheck.
