The Financial Industry Regulatory Authority has sanctioned eight firms and 10 individuals for selling troubled private placements without have a reasonable basis for recommending them.

The sanctions were imposed after FINRA found that the broker-dealers did not have adequate supervisory systems in place to fully understand the risks involved with these offerings, and therefore failed to conduct proper due diligence. The firms involved also did not have “reasonable grounds” to believe the securities were suitable for the clients, according to the regulator.

In the cases examined by FINRA, interests were sold in public placements issued by companies including Provident Royalties, Medical Capital Holdings, and DBSI, which went on to fail at a significant cost to investors.

"FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers,” said Brad Bennett, the organization’s executive vice president and chief of enforcement. He added that in the presence of “multiple red flags” relating to these investments, firms and individuals failing to conduct due diligence would not be able to place the whole burden of responsibility onto the issuers of fraudulent private placements.

The regulator imposed the following sanctions:

NEXT Financial Group, based in Houston, TX, was ordered to pay $2 million in restitution to affected customers and fined $50,000. The vice president of investment products and services there, Steven Lynn Nelson, was suspended from any principal role for six months and fined $10,000.

Investors Capital Corporation, based in Lynnfield, MA, was ordered to pay around $400,000 in restitution to affected customers.

Garden State Securities, based in Red Bank, NJ, and Kevin John DeRosa, a co-owner of the firm, were ordered to pay $300,000 in restitution on a joint-and-several basis to customers. Furthermore, DeRosa was suspended from any role for 20 business days and for an additional two months in any principal capacity, and fined $25,000. Vincent Michael Bruno, the firm's chief compliance officer at the time, was suspended for one month in a principal capacity and fined $10,000.

Capital Financial Services of Minot, ND, was ordered to pay $200,000 in restitution to affected customers, and Brian Boppre, a former principal, was suspended in any principal capacity for six months and fined $10,000.

National Securities Corporation, based in Seattle, WA, was ordered to pay $175,000 in restitution to affected customers, and Matthew Portes, director of alternative investments/director of syndications, was suspended from any principal role for six months, with a fine of $10,000.

Equity Services, based in Montpelier, VT, was fined $50,000 and ordered to pay nearly $164,000 in restitution. Stephen Anthony Englese, senior vice president for securities operations, was suspended from association with any FINRA-regulated firm in any capacity for 30 business days and fined $10,000; and Anthony Paul Campagna, a registered representative, was suspended from association with any FINRA-regulated firm in any capacity for 30 business days and fined $25,000.

Securities America, of La Vista, NE, was fined $250,000.

Newbridge Securities Corporation, based in Fort Lauderdale, FL, was fined $25,000, and Robin Fran Bush, the former chief compliance officer was suspended in any principal capacity for six months and fined $15,000.

Leroy Paris, former president and chief executive of now-defunct Meadowbrook Securities, which was based in Jackson, MS, was suspended for six months from any principal role and fined $10,000.

Michael Shaw, formerly associated with VSR Financial Services, of Baton Rouge, LA, was barred from the industry in connection with the sale of a private placement offered by DBSI, and FINRA also alleges that he falsified customer account documents.

The firms and individuals implicated neither admitted nor denied the charges, but consented to the entry of FINRA's findings.