← Broker database 2022-11-14
Boustead Securities Fined for Customer Information Collection Failures
According to FINRA, Boustead Securities, LLC was censured and fined $35,000 for failing to collect required customer and investment profile information for private placement participants and failing to file required corporate offering documents.
The firm's written supervisory procedures required use of new account forms to collect customer information, but the firm did not enforce this for private placement customers. Instead, the firm collected information through issuer-specific subscription agreements, affiliated crowdfunding portal registration processes, or accredited investor questionnaires. The procedures did not address crowdfunding portal information collection, provide guidance on subscription agreement or questionnaire content, or require specific customer information be solicited. In sampled transactions, the firm failed to collect at least one required component of customer and investment profile information.
Additionally, the firm's supervisory system was not reasonably designed to achieve Rule 5110 compliance. The procedures acknowledged the obligation but established no process to ensure timely filings or assign responsibility for compliance. Although the firm authorized outside counsel to make filings, it had no process to ensure counsel or others made filings in accordance with the rule. The firm failed to file, or timely file, documents required by Rule 5110.
Collecting complete customer information is fundamental to ensuring investment suitability and protecting investors from unsuitable recommendations. This case highlights that firms must have clear procedures for collecting all required information regardless of how customers participate in offerings, and must implement systems to ensure compliance with offering filing requirements.