According to FINRA, Patrick Capital Markets, LLC was censured and fined $80,000 for willfully violating federal securities laws in connection with contingency offerings where it served as the managing broker-dealer.

The firm violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-9 by failing to terminate contingency offerings and return investor funds when material terms changed. In two offerings, when the issuer amended the offering by reducing the minimum contingency, the firm was required to terminate both offerings and return investor funds. Instead, the firm continued to raise funds and later released them to the issuers after the amended contingencies were met.

In a third offering, the firm released funds to the issuer before the offering reached the required minimum contingency. This rendered false the representation made in the offering documents that investor funds would be returned if the minimum amount was not raised during the offering period.

These violations are particularly serious because contingency provisions exist to protect investors. When an offering has a minimum contingency requirement, investors are assured that their money will only be used if enough capital is raised for the venture to have a reasonable chance of success. By circumventing these protections, Patrick Capital Markets put investors at increased risk.

Investors considering private placements or contingency offerings should carefully review the offering documents and understand the conditions under which their funds may be held or returned. If an offering's terms change, investors should be notified and given the opportunity to withdraw their investment.