An Overland Park-based brokerage firm and its principal owner have agreed to fines, censure and other actions by the Financial Industry Regulatory Authority.
Ari Financial Services Inc. and William Brian Candler, of Leawood, neither admitted nor denied FINRA’s claims but agreed to a settlement that included findings that each had violated securities regulations. In one instance, investors placed $560,000 in an investment called the Bridgeport Oaks Fund that “was later discovered to be a Ponzi scheme,” FINRA’s announcement said.
A Ponzi scheme generally is designed to pay returns to early investors with money raised from subsequent investors to give the illusion of a successful investment and attract more investors. The Bridgeport Oaks Fund’s owners pleaded guilty to federal mail and wire fraud charges and were sentenced to prison and ordered to pay more than $18 million in restitution.
FINRA did not say Candler or Ari Financial were aware of the scheme but cited shortcomings in their duties to investigate it.
According to FINRA’s order accepting the settlement, Ari Financial had received due diligence reports on Bridgeport Oaks that raised “red flags” about the fund issuer, including that several of the principals and property managers of the fund previously had filed for bankruptcy.
“Candler failed to conduct a reasonable investigation of the red flags raised by the two due diligence reports, and did not perform a reasonable independent due diligence investigation prior to the firm’s sales of the Bridgeport Oaks Fund,” the FINRA order said.
Tom Fehn, Candler’s attorney, called the statement in the order “an allegation which has not been confirmed or denied.”
Ari Financial was censured and fined $7,500, which FINRA said was a lower fine given the firm’s revenue and financial resources. The firm agreed for one year to submit retail communications to FINRA in advance of their use.
Candler was censured and fined $2,500, which also reflected his financial status. Candler also was suspended for 10 days from association with any FINRA member in any capacity and association for an additional 10 days in any principal capacity.
Candler completed the suspensions in July.