The Financial Industry Regulatory Authority (FINRA) revealed in a filing Monday that it has fined Cova Capital Partners LLC for failing to conduct adequate due diligence before recommending private placements to retail customers.
The firm was also found to have lacked a proper supervisory system and failed to comply with filing requirements.
Between June 2018 and December 2021, Cova is said to have recommended three private placements without verifying key details about the issuers and investment risks.
As a result, FINRA determined that Cova willfully violated Regulation Best Interest (Reg BI) under the Securities Exchange Act of 1934, along with FINRA Rules 2111 and 2010.
Additionally, between June 2018 and December 2023, Cova reportedly failed to maintain and enforce supervisory policies that ensured compliance with best interest obligations for private placements.
FINRA found that Cova’s policies lacked clear procedures for due diligence, documentation, and approval processes. This resulted in further violations of FINRA Rules 3110 and 2010.
FINRA also penalised Cova for failing to make a timely filing for one private placement offering, violating FINRA Rule 5123.
As part of the settlement, Cova accepted a censure, a $30,000 fine, and an undertaking to improve its compliance procedures. The firm must now certify that it has implemented a supervisory system designed to meet regulatory obligations.
Cova accepted and consented to the findings by FINRA without admitting or denying them.