Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that FINRA’s Department of Enforcement recently brought disciplinary proceedings against broker-dealer Cabot Lodge Securities LLC (CRD # 159712) for multiple securities violations. The action was brought after an investigation into securities violations regarding possible fraud in its underwriting of an initial public offering (IPO) of real estate investment trusts (REITS). The Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Cabot Lodge Securities LLC.
FINRA’s Allegations against Cabot Lodge Securities LLC
According to FINRA’s Complaint (Disciplinary Proceeding No. 2014041541401), dated January 2, 2020, Cabot Lodge is alleged to have engaged in the following multiple securities violations:
- “From August 2012 to February 2016 (the “Relevant Period”), Cabot Lodge Securities LLC (“Cabot Lodge” or the “Firm”) participated in an initial public offering (“IPO”) of a non-traded real estate investment trust (the “REIT”) in which the amount of organization and offering expenses (“O&O”) exceeded fair and reasonable limits, and compensation to Cabot Lodge representatives was not disclosed”;
- “These failures resulted largely from the Firm’s failure to supervise its underwriting and sales of the REIT, which was its main product during the Relevant Period”;
- “At that time, O&O expenses well exceeded reasonable limits under FINRA Rules, and Cabot Lodge submitted a plan to FINRA to address them. However, Firm personnel ignored their duty under the plan and FINRA Rules to adopt controls and to monitor O&O expenses”;
- “These violations resulted from Cabot Lodge’s failure to establish, maintain and enforce a supervisory system, including written procedures, reasonably designed to achieve compliance with FINRA Rules 5110 and 2310, in violation of FINRA Rules 3110(a) and (b) and 2010, and NASD Rule 3010(a) and (b)”; and
- “Finally, in violation of FINRA Rules 2111(a) and 2010, Cabot Lodge did not have a reasonable basis to believe that its January 2016 recommendation that an elderly customer invest in the REIT was suitable based upon his investment profile.”
Cabot Lodge Securities LLC has a History of Regulatory Sanctions
In addition to the current investigation, Cabot Lodge Securities LLC has been the subject of previous actions brought by FINRA’s Department of Enforcement. According to FINRA Letter of Acceptance, Waiver and Consent (AWC) dated May 6, 2015, Cabot Lodge Securities LLC consented to, without either admitting to or denying the following findings:
- “During the period from October 16, 2012, through December 12, 2012, (the “Relevant Period”), the Firm conducted a securities business on various dates while failing to maintain its required minimum net capital”;
- “… the Firm’s minimum required net capital requirements ranged from $9,568 to $23,763, and the Firm’s net capital deficiencies ranged from $1,611 to $109,929”; and
- “By reason of the foregoing, the Firm was in violation of Section 15(c) of the Exchange Act, Exchange Act Rule 15c3-1 promulgated thereunder, and FINRA Rule 2010.”
In addition to FINRA’s findings in that matter, Cabot Lodge Securities LLC agreed to the following sanctions:
- Censure; and
- A fine of $20,000.00
Possible Recourse against Cabot Lodge Securities
If you or someone you know has or had a brokerage account with Cabot Lodge Securities LLC and have concerns regarding losses in your investments or possible sales practice violations including fraud, you may be entitled to recover lost funds. The Law Office of Kevin J. Deloatch, Esq. has an extensive securities law practice and over 30 years of experience on Wall Street. Call today at (646) 792-2156 for a free consultation. The time to file your claim may be limited so you should call today to avoid delay.
