A Davie, FL-based broker-dealer and its owner agreed to settle FINRA charges that the firm, through its owner, sold over one billion shares of a low-priced stock that was neither registered with the SEC nor exempt from registration. It was found that Tradespot Markets Inc., through Mark Bedros Beloyan, its owner and CCO, failed to establish and maintain adequate supervisory pols and procedures, including WSPs, applicable to the distribution of unregistered and non-exempt securities. FINRA Findings of Alleged Violations. Tradespot, through Beloyan - who also served as the firm's AML Compliance Officer, failed to implement or enforce the firm’s AML program, in the following circumstances failed to identify suspicious activity, properly investigate it, and report it through Form SAR-SF, as appropriate.

• billions of shares of a low-priced stock of issuers in certificate form were deposited into accounts controlled by a person with a regulatory and criminal history.
• the individual liquidated those shares generally soon after their deposit, and wired the sales proceeds out of the accounts soon after liquidation.
• despite the suspicious nature of a company’s activity in a stock, the suspicious nature of the activity of the company’s sole owner’s non-qualified account and his regulatory and criminal history, the firm acting through Beloyan:
  • failed to conduct the necessary due diligence to determine whether they were participating in a scheme to evade registration requirements;
  • generally relied exclusively on the firm’s clearing firm to determine whether the subject shares of stock were registered or exempt.
  • did not acquire a copy of the relevant stock certificates or documents regarding the owner’s acquisition of the shares, thereby participating in the illicit distribution of more than 1 billion shares of unregistered and non-exempt stock.
  • either failed to identify or chose to ignore the suspicious activity, and thus failed to investigate and report the activity in contravention of federal laws, NASD/FINRA rules and the firm’s AML policies and procedures.
  • failed to report such activities through a Form SAR-SF.
  • failed to establish and maintain procedures regarding the distribution of such securities in connection with its clearing firm’s acceptance of the delivery of shares of stock in certificate form and customers’ subsequent sale of the same;
  • firm’s WSPs did not require an inquiry into whether deposited shares of stock were registered with the SEC or exempt.

For example, between May and December 2008, Beloyan sold over 1.1 billion shares of low-priced Heritage for one of the firm's customers.  FINRA illustrates sales of other securities and additional facts and circumstances in settlement documentation.  For further details, go to:   [FINRA AWC #2009017590801. FINRA Fines and Sanctions.   Firm fined $25K;  Beloyan received a one-month full suspension and a one-month suspension as a principal.  In light of Beloyan’s financial status, no monetary sanctions were imposed.   [FINRA Disciplinary Actions for October 2011]