Finance 500 Fined & Censured for Inadequate Supervision, Misleading Ads

Attorney Advising Disclaimer

FINRA censured Finance 500, Inc. of Irvine, California and fined the firm $85,000 for inadequate supervisory systems related to private placement transactions, such as supervisory failures related to the areas of due diligence, suitability and marketing materials.

The sanction also includes a penalty for using or permitting the use of marketing materials that were not fair and balanced, misleading, unwarranted, and which failed to disclose Finance 500's connection to the issuer.

FINRA AWC #2013038091902

Three of the four issuers FINRA cited in its action against Finance 500 are over-the-counter issuers that raised nearly $5 million from working with Finance 500. The fourth issuer is a privately held company that worked with Finance 500 to raise about $300,000 through the sales of a convertible note and common stock.

Finance 500 allegedly used unbalanced and unwarranted advertising materials, including PowerPoint presentations and other communications that contained inadequate risk disclosure and failed to paint an accurate picture of risks and rewards, negative financial performance, and similar concerns. For instance, one issuer lacked revenue and had no current customers, yet Finance 500 purportedly failed to disclose this fact and its supervisory systems were reportedly deficient to such a degree that the firm either failed to recognize or adequately respond to such lapses.

The investigation states that Finance 500's inadequate supervision of due diligence manifested in several failures in identifying or adequately responding to red flags with the issuers, specifically those related to weak management, precarious financial positions, and failure to pay existing debt holders, including disputes between the privately held company and a vendor.

Finally, Finance 500 allegedly failed in its suitability supervision by not having a system or written procedures in place for collecting suitability documents from each customer; in some cases, Finance 500 apparently collected incomplete documents that did not include all requested information. Nonetheless, according to FINRA, the transactions were effected.

If you have invested with Irvine's Finance 500, Inc. or with any broker, financial adviser or firm whose inadequate supervisory systems—such as an inability to detect or adequately respond to red flags and similar concerns—or misleading, exaggerated, inaccurate, or inadequate sales marketing materials have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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