FINRA NAC Reverses Prior Decisions on NYPPEX
New York, December 11, 2024 – FINRA’s National Adjudicatory Council (“NAC”) reversed various findings at a prior FINRA proceeding vs. NYPPEX, LLC (“NYPPEX”), Laurence Allen, and/or Michael Schunk. The National Adjudicatory Council is a FINRA committee that reviews initial decisions rendered in FINRA membership proceedings. FINRA is the securities regulator in the United States for broker-dealer members and its associated persons.
The original allegations stem from the Office of the New York Attorney General Letisha James. In summary, the NY AG complaint alleged fraud under the NY Martin Act against ACP X, LP, a private equity fund, a subsidiary of NYPPEX Holdings, LLC and various other parties.
The original NY AG complaint and the NY State Court decision were strongly criticized in an independent investigation report by law firm, Greenberg Traurig. The report concluded the NY AG constructed a narrative which was premised on a fundamental misunderstanding of the fund’s governing documents and how private partnerships work. The Court appears to have adopted the NYAG’s allegations without critical analysis. The Decision contains no reference to or discussion of any provision of the [fund’s] PPM or LPA, nor to the testimony of multiple Limited Partners who testified on behalf of the [General Partner].
Numerous investors in the private fund have sent letters to the NY State Court complaining about the NY AG’s interference in their private partnership, about the Court’s bias in favor of the NY AG, and rejecting the receiver’s fee requests and management of the fund.
Limited partner, Sam Shihadeh, stated “[the receiver] is clearly not acting in the best interests of investors in our fund, and I believe your court to date has been extremely biased in favor of the NY AG.”
A retired limited partner, Walter Cholewa, believes “the fund has been unreasonably frozen by the NY AG for over 5 years since December 2018 through their highly questionable Ex Parte Injunction. I believe {the receiver] is acting without proper oversight by your Court and is depleting the assets of the fund.”
Another retired limited partner, John Neal, stated, “the {receiver’s} work is shoddy and continues to make errors in their calculations of my capital account balances in the fund. I don’t believe [the court] should approve [the receiver’s] hourly rates to continuously correct their work product”.
For further information, please contact info@nyppex.com.
About NYPPEX Holdings
NYPPEX Holdings is one of the world’s leading providers of risk management solutions for the private capital funds industry. NYPPEX serves private fund managers, financial institutions, endowments, foundations, institutional investors, family offices, private clients and their respective advisors worldwide.
Since 2004, the NYPPEX QMS™ has been formerly recognized by the U.S. Internal Revenue Service though a private letter ruling under Internal Revenue Code §1.7704. A NYPPEX QMS Opinion Letter can help private capital funds meet the requirements of a QMS safe-harbor exemption under IRS §1.7704. This facilitates regulatory compliance with the IRS and helps avoid an adverse taxable event when private funds seek to permit higher volumes of secondary interest transfers annually.
