Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that broker-dealer, Chardan Capital Markets, LLC (hereinafter “Chardan”) (CRD # 120128) was recently sanctioned by FINRA’s Department of Enforcement. The sanction occurred as a result of an investigation into its failure to establish and maintain a supervisory system regarding conflicts of interest between its research and investment banking relationships. Accordingly, the Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Chardan.
Registration Background for Chardan Capital Markets, LLC
Chardan became a FINRA member in 2002. It is headquartered in New York, NY and offers a range of broker-dealer services, including sales and trading; investment banking; and research. It currently has approximately 43 registered representatives.
FINRA’s Allegations against Chardan Capital Markets, LLC
FINRA’s investigation led to Chardan entering into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA on July 6, 2020. According to the AWC, Chardan consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:
- “From March 5, 2013 through August 31, 2016 (the “Review Period”), Chardan violated certain research report disclosure requirements of FINRA Rule 2241 and NASD Rule 2711 (collectively, the “Research Rules”), and failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with those rules”;
- “Chardan improperly published at least 103 research reports that contained 123 disclosure deficiencies, including failing to accurately disclose investment banking relationships, in violation of F1NRA Rules 2241(c) and 2010, and NASD Rule 2711(h)”;
- “The Firm’s disclosure failures were the result of Chardan’s failure to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with the disclosure requirements of the Research Rules”;
- “Also, during the Review Period, Chardan failed to enforce written supervisory procedures reasonably designed to achieve compliance with provisions of the Research Rules that require firms to manage conflicts of interest between research analysts and those engaged in investment banking services”;
- “These failures involved the supervision of the Special Equities Group (“SEG”), which was a subgroup of the Firm’s investment banking department during the Review Period”;
- “Chardan’s supervisory failure created the risk that research analysts could be inappropriately influenced by the Firm’s interest in attracting and maintaining investment banking business”;
- By virtue of the above, Chardan violated the following rules:
- FINRA Rules 2241(c), 2241(b)(1), 2241(b)(2)(G), 2241(b)(2)(M)(i);
- FINRA Rule 2010;
- NASD Rules 2711(h) and 2711(i);
- NASD Rule 3010(a) and 3010(b)(1); and
- FINRA Rule 3110(a) and 3110(b)(1).
As a result of such violations and in addition to the above described findings and conclusions, FINRA’s July 6, 2020 AWC also indicates that Chardan consented to the following sanction(s):
- A censure; and
- A fine of $100,000.
Chardan Capital Markets, LLC has a History of Regulatory Actions
In addition to the findings of FINRA’s Department of Enforcement, FINRA BrokerCheck for Chardan (pages 20 – 54) reveals it has a history of regulatory actions being brought against it, including but not necessarily limited to the following:
- On December 20, 2018, Chardan entered into an AWC with FINRA. Chardan consented to the entry of findings that it was a distribution participant in an offering of a company’s common stock, shares of which it purchased during the restricted period. It failed to timely file a restricted period notification with FINRA. As a result, it agreed to the sanctions of censure and a $75,000.00 fine.
- On December 19, 2018, Chardan entered into a resolution with the NYSE and ARCA, Inc. Chardan consented to the entry of findings that it failed to comply with NYSE ARCA requirements by failing to timely file a restricted period notification, failing to timely file two trading notifications and by failing to implement and maintain a supervisory system reasonably designed to ensure compliance with NYSE ARCA equities rules. As a result, it agreed to the sanctions of censure and a fine in the amount of $18,500.00.
- On July 2, 2018, Chardan entered into an AWC with NASDAQ Stock Market. Chardan consented to the entry of findings that it failed to maintain a two-sides trading interest during regular market hours at prices within certain percentages away from the national best bid. As a result, it agreed to the sanctions of censure and a fine in the amount of $30,000.00.
- On May 16, 2018, Chardan entered into resolution with the SEC. Chardan consented to the entry of findings that it failed to file suspicious activity reports when it knew, suspected, or had reason to suspect certain transactions were unlawful. As a result, it agreed to the sanctions of censure and a fine in the amount of $1,000,000.00.
If you or someone you know has or had a brokerage account with Chardan Capital Markets, 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.