The Financial Industry Regulatory Authority announced that it has censured and fined Maryland-based brokerage firm Percival Financial Partners Ltd. and its principal, Kenneth P. Taylor Sr., for extensive and prolonged regulatory violations, including failing to maintain required net capital, conducting a securities business while suspended, filing inaccurate financial reports, and maintaining inaccurate books and records.
According to FINRA, by Nov. 1, 2021, Percival’s available net capital fell more than $79,000 below required minimums, driven by non-allowable assets and Taylor’s personal equity withdrawals.
Taylor, who founded the firm and served simultaneously as its chief executive officer, chief compliance officer, chief financial officer, chief technology officer, anti-money laundering compliance officer, introducing broker-dealer financial and operations principal, and executive representative, attempted to correct the shortfall with a $100,000 personal loan obtained from a customer. Because this was a personal loan that was contributed to the firm, this transaction only increased the firm’s liabilities, and the firm remained deficient through the end of 2021.
During this time, Percival continued to conduct securities business, bringing in over $100,000 in revenue. FINRA said that Taylor was aware of the firm’s net capital deficiency and had the authority to suspend the firm’s securities business, but did not do so.
By April 1, 2022, the firm’s net capital fell below required thresholds again, this time with a deficiency amount exceeding $76,000. The deficiency was caused by capital withdrawals made by Taylor, and between April 1, 2022, and April 9, 2023, Percival remained net capital deficient with a net capital deficiency exceeding $900,000 in April 2023. During this period, Taylor continued to make regular capital withdrawals from the firm and caused Percival to issue at least seven checks from the firm’s bank account to Taylor, totaling $130,000.
From April 1, 2022, to April 9, 2023, FINRA said that Taylor permitted Percival to continue to conduct a securities business, and the firm received securities commissions exceeding $300,000 during this period. In addition, Percival received more than $60,000 in revenues from its transition management business. Again, Taylor was aware of the firm’s net capital deficiency, but did not suspend the firm’s securities business.
FINRA suspended Percival’s membership on April 10, 2023, for failure to file a 2022 annual audit report. Nonetheless, the firm, under Taylor’s direction, continued to engage in transition management business, earning over $900,000 after the suspension took effect. Throughout this period, Taylor submitted multiple deficient audit reports that were repeatedly rejected by FINRA for material inaccuracies, including mischaracterization of liabilities and failures to disclose required information.
Regulators also found that Percival consistently filed inaccurate FOCUS reports and maintained inaccurate books and records from at least Nov. 1, 2021, through Jan. 31, 2025. Examples of Taylor’s erroneous recording include inaccurately recording his capital withdrawals as loans on the firm’s general ledger, inaccurately recording his $100,000 transfer to the firm as additional paid-in capital, and failure to accurately record a $450,000 advanced deposit as a firm liability. Additionally, some audit reports reused signatures and notary stamps from prior years, in violation of SEC and FINRA requirements.
Through their actions, Percival Financial and Taylor violated multiple FINRA and Exchange Act of 1933 rules. Without admitting or denying the claims, Percival, which remains suspended, agreed to a censure and a $150,000 fine, while Taylor agreed to a $15,000 fine and a two-year suspension from acting in any principal capacity. He must requalify by examination before resuming such roles in the future.
According to FINRA, the matter originated from a regulatory tip.
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