← Broker database 2025-01-08
IRC Securities Fined $45,000 for Failing to Supervise Promissory Note Activity
According to FINRA, Investment Research Consortium Securities LLC (dba IRC Securities LLC) has been censured and fined $45,000 for failing to properly evaluate a registered representative's promissory note activity.
The firm failed to determine whether a representative's promissory note activity should have been considered and treated as a private securities transaction. Instead, the firm simply approved the activity as an amendment to the representative's previously disclosed outside business activity (OBA) without further evaluation.
The representative had disclosed starting "a new strategy to raise capital called Promissory Notes where we pay investors a fixed rate of interest" through his OBA, which served as investment manager to a series of investment funds. Without the firm's knowledge or supervision, the representative subsequently sold at least 23 additional promissory notes on behalf of his OBA.
Private securities transactions require broker-dealer notification and approval because they occur outside the firm's normal supervision. When firms fail to properly evaluate whether activities constitute private securities transactions, investors may not receive the protections that come with firm oversight.
This case underscores the importance of firms carefully scrutinizing activities disclosed by representatives, particularly those involving the raising of capital from investors. Investors should be cautious about investments offered outside the normal broker-dealer channel.