Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that introducing broker-dealer, Coastal Equities, Inc. (CRD # 23769) was recently sanctioned by FINRA’s Department of Enforcement after an investigation into its sales of GPB Capital Holdings, LLC (GPB Capital) and its failure to supervise.
The Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Coastal Equities, Inc. and/or their investment in GPB Capital.
Coastal Equities, Inc. has been a member firm of FINRA since 1989. It is headquartered in Wilmington, DE. It is an introducing broker that conducts a general securities business. During the relevant period of the investigation, it had 72 branch offices with approximately 165 registered representatives.
FINRA’s Allegations Against Coastal Equities, Inc.
According to FINRA Letter of Acceptance, Waiver and Consent (AWC) dated December 16, 2022 (No. 2019061213401), Coastal Equities, Inc. consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:
- “Between May 1, 2018 and June 30, 2018, Coastal negligently failed to tell customers it solicited to invest in offerings related to GPB Capital Holdings, LLC (GPB Capital) that the issuers failed to timely make required filings with the Securities and Exchange Commission, including filing audited financial statements”;
- “On April 27, 2018, GPB Capital released what it characterized as important updates regarding the audited financial statements for certain of its limited partnerships, including Automotive Portfolio and Holdings II”;
- “The letters, which were sent to broker-dealers that sold GPB Capital-related investments, including Coastal, stated that GPB Capital was in the process of registering certain classes of securities issued by certain of the limited partnerships, including Automotive Portfolio and Holdings II, with the SEC”;
- “Although Coastal received the email from GPB Capital notifying it of the delays and GPB Capital’s stated intention to complete a forensic audit, Coastal sold 11 limited partnership interests in Automotive Portfolio and one limited partnership interest in Holdings II after the date of the letter”;
- “In connection with these sales, however, Coastal’s representatives did not inform the customers that Automotive Portfolio and Holdings II had not timely filed their audited financial statements with the SEC or the reasons for the delay”;
- “The delay in filing audited financial statements was material information that should have been disclosed”;
- “From August 2014 through July 2018, Coastal failed to supervise one of its representatives (Representative A) by failing to reasonably investigate red flags that the representative was falsifying documents regarding customers’ financial status, for example by recording false increases in the net worth and liquid net worth of customers”;
- “Between August 2014 and July 2018, Representative A recommended that his customers purchase GPB Capital investments”;
- “Coastal’s written supervisory procedures stated that registered representatives are responsible for ensuring customers meet suitability standards for products they recommend”;
- “During its review of Representative A’s transactions, the firm failed to recognize multiple red flags that Representative A was circumventing Coastal’s concentration limits by inflating customers’ financial information on the Disclosure Forms required for alternative investment transactions”;
- “In connection with at least 22 customers’ investments in GPB Capital, Representative A submitted altered Disclosure Forms. The majority of these alterations involved unsubstantiated increases in the customer’s net worth, liquid net worth, or both”; and
- By virtue of its actions, Coastal Equities, Inc. violated FINRA Rule 2010 regarding standards of commercial honor and principles of trade, NASD Rule 3010 regarding supervision and FINRA Rule 3110 regarding supervision.
FINRA Sanctions Coastal Equities, Inc.
As a result of such violations and in addition to the above-described findings and conclusions, FINRA’s December 16, 2022 AWC also indicates that Coastal Equities, Inc. consented to the following sanction(s):
- A censure;
- A fine in the amount of $150,000.00; and
- Partial restitution of $268,800.00 plus interest
Coastal Equities, Inc. Has A History of Securities Industry Regulatory Sanctions
In addition to Coastal Equities, Inc. being sanctioned by FINRA for its sales of GPB Capital Holdings, LLC (GPB Capital) and its failure to supervise, FINRA BrokerCheck for Coastal Equities, Inc. reveals it has a prior history of regulatory sanctions, including but not necessarily limited to the following:
- On November 9, 2020, Coastal Equities, Inc. entered into FINRA Letter of Acceptance Waiver and Consent (No. 2017052325702), in which it consented to without admitting or denying findings that it failed to reasonably supervise a registered representative who recommended excessive and unsuitable trades (churning) in customer accounts. It was censured and ordered to pay $270,320.00 plus $9,588.80 in interest.
- On April 30, 2018, Coastal Equities, Inc. entered into FINRA Letter of Acceptance Waiver and Consent (No. 2015044476201), in which it consented to without admitting or denying findings that it bought and/or sold corporate bond securities for its own account from and/or to a customer at an aggregate price that was not fair and reasonable, taking into consideration all relevant circumstances. Coastal Equities, Inc. was censured, fined $90,000.00 and ordered to pay restitution in the amount of $60,244.46.
- On December 11, 2017, Coastal Equities, Inc. entered into settlement with the U.S. Securities and Exchange Commission (SEC) (SEC Admin. Release 34-82282) after the SEC instituted public administrative proceedings against the firm. The proceedings arose out of Coastal Equities, Inc.’s failure to reasonably supervise the former president, CEO and CCO. The former CEO who was both a registered representative and an investment adviser stole over $1.5 million from at least 12 individuals who were investment advisory and/or brokerage clients. Coastal Equities, Inc. was censured and ordered to pay a civil money penalty in the amount of $40,000.00.
Have You Lost Money Investing with Coastal Equities, Inc.?
If you or someone you know has or had a brokerage account with Coastal Equities, Inc. and have concerns regarding losses from your investment in GPB Capital Holdings, LLC or other 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.