Erez Law is currently investigating KCD Financial, Inc. financial advisors regarding the sale of unregistered securities in WRF Distressed Residential Fund 2011, LLC. KCD Financial, Inc. is an independent broker-dealer headquartered in De Pere, Wisconsin. KCD Financial, Inc. also did business under the name Westmount Realty Finance LLC.
In May 2017, the Securities and Exchange Commission (SEC) censured and fined KCD Financial, Inc. $73,000 based on findings that between April and October 2011, the firm sold at least $2 million in unregistered securities and failed to supervise its representatives’ sales of unregistered securities. The unregistered security, WRF Distressed Residential Fund 2011, LLC, was sponsored by Westmount Realty Finance. The private placement was expected to invest up to $10 million “to fund the bulk acquisition of distressed residential properties and
related assets . . . at deep discounts.”
According to the complaint, the unregistered securities were exempt from registration and prohibited from general solicitation or advertising. Additionally, the fund was only supposed to be sold to accredited investors who had knowledge and experience in financial business matters, and to no more than 35 investors. Despite this, Westmount Realty Finance generated a press release concerning the launch of the investment fund, which resulted in newspaper articles and posts on public websites. The Westmount Realty Finance’s securities attorney contacted the firm and informed it that the newspaper articles amounted to a breach of the prohibition against general solicitation and advised the firm that the newspaper articles should not be posted on the issuer’s website. Despite the attorney’s warning, KCD Financial, Inc. did not prohibit sales of the offering. Instead, the firm took some efforts to limit sales only to accredited investors with whom the firm had a prior relationship and investors who did not see the newspaper articles, and it made ineffective attempts to have the articles removed from the affiliate’s website. The SEC found that KCD Financial, Inc. should have directed its prompt and full attention to the breach of the prohibition against general solicitation, and that the firm’s efforts to limit sales were irrelevant to whether the articles constituted a general solicitation.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, KCD Financial, Inc. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against KCD Financial, Inc. financial advisors regarding the sale of unregistered securities. If you were a client of KCD Financial, Inc. or another firm, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.