Last Updated: June 2024 (Austin, Texas)
Texas State Securities Board Sanctions Masterworks, Seller of Artworks
In a Consent Order dated 6/17/24, The Texas State Securities Board (TSSB) reprimanded Masterworks Administrative Services and assessed a fine of $150,000 for violating Section 4004.051 of the Texas Securities Act, which requires “dealers” to comply with applicable dealer registration provisions.
The TSSB found that from January 1, 2023- December 31, 2023, Masterworks sold securities to Texas residents totaling nearly $19,000,000. Approximately $15,000,000 were not properly notice filed with the Securities Commissioner as required by section 114.4(b)(5) of the Rules and Regulations of the TSSB.
Masterworks
Masterworks Administrative Services is the parent company of Masterworks LLC, a financial service company that specializes in the art investment market offering investors fractionalized investments in artwork through the sale of shares of LLCs formed for each artwork offered.
Initially Masterworks offered shares in the LLCs through registered broker-dealers acting as best-efforts underwriters. In 2023 they transitioned to a new model offering shares through registered investment advisors (RIAs).
Registered Investment Advisors have a duty to recommend only investments that are suitable taking into account the investors net worth, investment experience, health, investment objectives and risk tolerance.
FINRA Rule 2111 – suitability – Regulation Best Interest
The Texas State Securities Board
Mission of the TSSB, according to their website:
“The State Securities Board is responsible for administering and enforcing the Texas Securities Act. The mission of the State Securities Board is to protect Texas investors. Consistent with that purpose, the Agency seeks to ensure a free and competitive securities market for Texas, increase investor confidence, and thereby encourage the formation of capital and the creation of new jobs in Texas.”
The Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens.
Rex Securities Law
With offices in Boca Raton, FL and Austin, TX, stockbroker fraud attorney Rex Securities Law provides representation to investors nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers, registered investment advisors and broker dealers.
If you have questions about how your account has been handled, call (877) 224-3199 or contact us online via our secure form to speak with an experienced securities attorney at no cost to you.
Most cases are handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.
Visit our BLOG to search for a financial advisor, brokerage firm or an investment product you may be concerned about.