A failure to respond appropriately to FINRA requests for information has led to the expulsion of broker-dealer NYPPEX, LLC from membership and the barring of the firm’s former CEO, Laurence Allen, and CCO Michael Shunk.

A FINRA panel also found that NYPPEX and Allen took part in securities fraud. Shunk’s suspension for two years from acting in any professional capacity is the maximum suspension FINRA can apply, and comes because of his failure to supervise Allen.

NYPPEX had been issued with a temporary restraining order in December 2018 by a New York state court. The order alleged that Allen was engaging in “fraudulent and deceptive practices” linked to management of a private equity fund. In May 2021, FINRA’s enforcement department filed a nine-clause complaint against NYPPEX, Allen and Shunk, alleging a pattern of misconduct following the temporary restraining order.

Aggressive sales campaign

During an 11-day hearing, the panel heard that, following the December 2018 order, NYPPEX launched an aggressive sales campaign to raise $10m by selling interests in the broker-dealer’s parent company NYPPEX Holdings. During that campaign, the panel found that NYPPEX and Allen “committed securities fraud when they ‘intentionally or, at a minimum, recklessly’ made material misstatements and omissions to prospective investors”.

Material misstatements and omissions were also found to have occurred in information given about NYPPEX Holdings’ valuation and financial condition, the NY court order, and ongoing investigations. NYPPEX and Allen were also found to have failed to cooperate with FINRA’s investigation, with the panel observing this “failure to comply completely was intentional, and part of a lengthy pattern throughout the investigation of flouting FINRA 8210 requests”.

Substantial risk

The panel concluded that NYPPEX and Allen “are unfit to remain in the securities industry, and their continued presence would pose a substantial risk to the investing public”.

The sanctions have been stayed pending the result of an appeal by the respondents to FINRA’s National Adjudicatory Council (NAC). The full text of the panel decision is available on FINRA’s website.