According to FINRA, SI Securities, LLC was censured and fined $185,000 on July 2, 2024, for willfully violating Exchange Act Rule 10b-9 and FINRA Rule 2010 by failing to return investor funds after a material change to the minimum contingency in an offering.

The firm sold subscriptions to a private placement offering on a best-efforts basis with a minimum contingency of $1.29 million. On the day before the termination date, the issuer reduced the minimum contingency amount to $790,000. Because this was a material change to the terms of the offering, the firm was required to terminate the offering and return investor funds at that time. Instead, the firm asked investors to affirmatively reconfirm their subscriptions subject to the reduced minimum contingency amount, only refunding those who did not reconfirm.

Additional violations included failing to return funds directly to investors for terminated offerings. For terminated offerings that did not meet the minimum contingency, the firm instructed the escrow agent to send refunds to a separate firm account rather than directly to investors. The firm also failed to timely file with FINRA required documents and information for more than 50 private placement offerings, with delays ranging from two to 383 days.

The firm also willfully violated Exchange Act Section 17(a)(1) and Rule 17a-14 by failing to have a supervisory system reasonably designed to achieve compliance with Form CRS obligations and failed to deliver timely Form CRS to customers. This case demonstrates the critical importance of following proper procedures when material changes occur in securities offerings and maintaining adequate supervisory systems for regulatory compliance.