The NASD has sanctioned Metropolitan Investment Securities of Spokane, Washington, charging the firm with abusive sales practices and inadequate supervisory procedures. Metropolitan has been censured, fined $500,000, directed to make restitution to investors totaling more than $2.8 million, and ordered to maintain a special escrow account of $1 million for the next five years to cover potential investor claims.
In addition, the NASD is requiring Metropolitan to enhance its supervisory procedures in order to prevent recurrence of sales practice abuses.
The NASD found that Metropolitan engaged in fraudulent and unethical sales practices in connection with the sale of debentures, investment certificates and preferred stock issued by two affiliated companies, Metropolitan Mortgage & Securities Co., Inc. and Summit Securities, Inc. Metropolitan and its affiliates were controlled by a single individual – who was not named in the NASD press release – and share offices in Spokane.
According to the NASD, Metropolitan raised millions of dollars for the affiliates by making unfair, unbalanced sales presentations. Registered representatives downplayed significant risk factors, including the affiliates’ lack of earnings, subordination of the securities to other obligations, and the absence of a liquid market for preferred stock. Investors were left with the false impression that their money would be safe.