The Financial Industry Regulatory Authority (FINRA) has finally expelled Provident Asset Management for committing outright securities fraud in a Ponzi scheme that involved the marketing of a series of private placements under the names “Provident Energy” and “Shale Royalties.” In typical FINRA-fashion, the expulsion was accomplished through a settlement in which the firm neither admitted nor denied any wrongdoing. FINRA’s expulsion did not come about until more than 6 months after the Securities and Exchange Commission filed a securities fraud lawsuit against Provident Asset Management in July 2009 and Provident Royalties, LLC filed for bankruptcy in June 2009. Meanwhile, FINRA also announced today that their head of enforcement, Susan Merrill, is stepping down to return to private practice.
According to FINRA, the self-regulatory agency is conducting a broader investigation into the more than 50 broker-dealers who sold the Provident Energy and Shale Royalties private placements to their customers, which may lead to more settlements and potential fines. Disgruntled investors have already begun filing securities arbitration claims against some of these broker dealers alleging unsuitability, fraud and misrepresentation.
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