FINRA suspended former Private Asset Group, Inc. principal Daryl Marc Holzberg of Tustin Ranch, California for failing to respond to several red flags indicating increased risks associated with Medical Capital Promissory Notes.
A Chief Compliance Officer at Private Asset Group, Holzberg was responsible for the firm's compliance with industry rules and regulations, not to mention applicable laws.
According to the findings, Private Asset Group sold to its clients Medical Capital Holdings, Inc.'s promissory notes, known as Medical Capital Provider Funding Companies ("MPFC" I-VI).
With Private Asset Group's customers investing nearly $45 million in MPFC notes III, IV and V, Med Cap represented a significant portion of Private Asset Group's business operation.
On July 31, 2008, Holzberg allegedly received an e-mail from Med Cap relating to the company's upcoming private placement memorandum ("PPM") for the new MPFC VI offering, the pre-PPM e-mail stating that Med Cap and its affiliates had "never defaulted in the payment of their obligations on debt securities and all interest payments on those securities were made when due."
FINRA found that when the memorandum was issued a week later, the PPM contained references to missed payments and other statements that were misleading and inconsistent with Med Cap's e-mail sent at the end of July.
FINRA believes this was a red flag Holzberg should have identified; the Authority found that instead of acting on the discrepancy, Holzberg nonetheless authorized continued MPFC investments, including the new MPFC VI product.
In 2009, Med Cap informed note holders of ongoing delayed interest payments, a letter that Holzberg also received. FINRA found that instead of acting on this red flag, Holzberg failed to suspend sales of MPFC VI.
FINRA found that Holzberg had multiple opportunities to recognize Med Cap's materially misleading and false representations, but failed to act on behalf of his firm.
Accordingly, when Holzberg allegedly failed to maintain due diligence and identify several red flags relating to a private placement, he allegedly caused the firm to no longer be in compliance with FINRA/NASD rules.
If you have invested with Daryl Marc Holzberg or with his employing firm Private Asset Group, over which he had compliance-related responsibility, and this failure to protect against Med Cap-related misconduct has resulted in losses or other detrimental effects to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.