FINRA Hearing Panel Fines, Suspends Investprivate's Chairman and CEO for Failure to Disclose Tax Liens, Customer Complaints
Washington, DC — A Financial Industry Regulatory Authority (FINRA) Hearing Panel issued a decision that imposed a 90-day suspension, a concurrent 10-day suspension, and a $12,500 fine against Scott Mathis, Chairman and CEO of New York's Investprivate, Inc. (now known as DPEC Capital, Inc.), for failing to disclose tax liens and two customer complaints on his Form U4s. Mathis and Investprivate were originally charged by FINRA with securities fraud, but those charges were later withdrawn.
The hearing panel decision addressed the last outstanding charges brought by NASD (FINRA's predecessor) in 2004 against Mathis. FINRA's Enforcement Department previously settled several other charges from that 2004 action against Investprivate; Mathis; Donald Geraghty, the firm's Director of Compliance; and Ronald Robbins, Executive Vice President of Investprivate's parent company, Diversified Biotech Holdings Corporation.
The 2004 complaint charged Investprivate and Mathis with securities fraud and other violations in connection with two securities self-offerings that raised approximately $17.6 million for the firm and its parent between June 2000 and February 2003. Geraghty was charged with supervisory and other violations, while Robbins was charged with participating in the management of Investprivate without being registered with NASD in any capacity.
FINRA's Enforcement Department later withdrew the fraud charges against Investprivate and Mathis. In May 2007, it reached a partial settlement with Mathis and full settlements with the firm, Geraghty and Robbins. At that time, the disclosure violation charges against Mathis were severed from the original complaint for consideration by a hearing panel.
Investprivate was censured and fined $205,000, of which $67,500 was imposed jointly and severally with Mathis; another $40,000 was imposed jointly and severally with Mathis and Geraghty; and $15,000 was imposed jointly and severally with Geraghty. The firm was suspended for 60 days from seeking or accepting new engagements to conduct or participate in the offer or sale of unregistered securities through any private offering, private placement or private investment in public equity (PIPE) transaction. The firm was also required to retain an independent consultant to conduct a comprehensive review of the adequacy of the firm's policies, systems, procedures and training relating to the offer or sale of unregistered securities.
In addition, Mathis and Geraghty were suspended from association with any registered firm in any principal capacity for 30 days. Robbins was fined $10,000 and suspended from associating with a registered firm in any capacity for 10 business days.
Without admitting or denying the charges, the firm and individuals consented to the entry of NASD's findings, which included: that the firm, through Mathis, negligently made untrue statements or omitted material facts from private placement memoranda distributed to investors or potential investors; that the firm, acting through Mathis, offered and sold securities without registration statements filed with the Securities and Exchange Commission; that the firm, acting through Geraghty, failed to report, or to timely report, customer complaints and settlements of customer complaints to NASD; that the firm, acting through Robbins, Mathis and Geraghty, permitted Robbins to engage in activity requiring registration as a general securities principal and a general securities representative without obtaining the required registrations; and, that the firm, acting through Geraghty failed to implement and enforce an effective supervisory system that would have enabled the firm to comply with federal securities laws and NASD rules.
The FINRA hearing panel issued its ruling on the remaining charges against Mathis - for failure to disclose tax liens and customer complaints on his Form U4 - in December 2007. The Hearing Panel found that the failure to disclose tax liens was willful and material, subjecting Mathis to a statutorily disqualification from association with any FINRA member. Mathis has appealed the hearing panel decision to FINRA's National Adjudicatory Council.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2007, members of the public used this service to conduct 6.7 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
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