Finra bars Halcyon Cabot Partners and its executives Morris, Heineman from securities industry

By Wendy Van Sickle

Columbus, Ohio, Oct. 7 – Halcyon Cabot Partners, Ltd. and its chief executive officer, Michael Morris, and chief compliance officer Ronald Heineman were barred from the securities industry by the Financial Industry Regulatory Authority “for fraud, sales practice abuses and widespread supervisory and anti-money laundering failures” according to a Wednesday press release from the authority.

“Finra’s investigation found that Halcyon, Morris and Heineman, along with a previously barred registered representative, Craig Josephberg, agreed to conceal the discount the issuer provided to a venture capital firm when it purchased a private placement in a cancer drug development company,” according to the release. “The scheme was effected through a bogus placement fee agreement that was entered into after the venture capital firm had already agreed to purchase the entirety of the offerings.

“Halcyon did not perform any work, as there was already a buyer in place, but rather returned almost all of its $1.75 million placement fee to the investor through sham consulting agreements. This fraudulent scheme allowed the drug company to conceal that it was selling its shares at a discount.”

The arrangement enabled the investor to cover up the kickback of the placement fee and “deceive the market into believing that the shares were being sold at the full offering price,” Finra’s executive vice president and chief of enforcement, Brad Bennett, said in the release.

Bennett called the actions “consistent with the culture of non-compliance fostered by Halcyon and its principals, which manifested itself in widespread sales practice abuses and anti-money laundering violations.”

In addition to the kickback scheme, Finra said it also found that Halcyon and Morris enabled a now-expelled broker-dealer, Felix Investments, LLC, to collect undisclosed commissions. “Under an agreement between Halcyon and Felix, Felix charged buyer commissions and Halcyon charged seller commissions on a transaction, despite the fact Halcyon did not provide any services to the sellers. Halcyon then secretly shared the sellers’ commissions with Felix,” Finra said.

The authority also found that Morris falsified Halcyon’s records to hide that Josephberg sold securities in states where he was not registered, including Florida, Texas and Colorado. Halcyon failed to supervise Josephberg, Finra said.

Halcyon Cabot Partners, Morris and Heineman neither admitted nor denied the charges but consented to the entry of Finra’s findings, according to the release.

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