FINRA Imposes Fine on Odeon Capital Group for Supervisory Failures

Odeon Capital Group has agreed to a $250,000 fine and censure as part of a settlement with the Financial Industry Regulatory Authority (FINRA), addressing violations of supervisory and compliance rules. This resolution comes under FINRA Rule 9216 and is intended to address specific rule violations described in the settlement.

The investigation revealed that between November 2020 and January 2024, Odeon failed to establish, maintain, and enforce a supervisory system compliant with FINRA rules. Specifically, Odeon breached FINRA Rules 3110 and 2010 by not implementing adequate supervisory procedures related to qualified independent underwriters (QIUs) as stipulated by FINRA Rule 5121.

Details of the Violation

FINRA’s review, conducted by the Department of Corporate Financing, found significant lapses in Odeon's supervisory practices. FINRA Rule 3110 requires member firms to establish a supervisory system to ensure compliance with applicable laws and regulations. Odeon's supervisory system lacked provisions to address FINRA Rule 5121's requirements concerning QIU participation and due diligence.

From November 2020 to July 2022, Odeon was engaged by a FINRA member firm with a conflict of interest to serve as the QIU for six SPAC public offerings. Odeon’s limited due diligence, which only included a review of Form S-1 registration statements without additional inquiry, did not meet the compliance standards expected under FINRA rules. Moreover, Odeon's written supervisory procedures (WSPs) were deficient in addressing SPACs and related risks until July 2022, and did not comply with FINRA Rule 5121 until January 2024.

Odeon has consented to a censure and a $250,000 fine. The firm has agreed to pay the fine promptly and has waived any claims of financial inability to pay.

As part of the settlement, Odeon has waived several procedural rights, including the right to a formal complaint and disciplinary hearing, and has agreed to forgo appeals to the National Adjudicatory Council or other higher courts.

The settlement underscores FINRA’s commitment to enforcing high standards of compliance and oversight within the financial industry. Odeon’s case highlights the critical importance of maintaining robust supervisory systems and adhering to regulatory requirements, particularly when involved in complex financial transactions such as SPAC offerings.

This resolution will become part of Odeon’s permanent disciplinary record and may influence future regulatory actions. The settlement also emphasizes the ongoing scrutiny and enforcement by FINRA to ensure adherence to securities laws and regulations.

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