Today's stories involve three principals from the same firm - Newbridge Securities - who (in concert) allegedly "turned a blind eye" to suspicious transactions, and possible "pump-and-dump" or other fraudulent schemes by customers with "disciplinary histories."  For complete details, click onto:  FINRA's Disciplinary and Other Actions for October 2010.

Making matters worse, Principal didn't take adequate steps to ensure that the client didn't make additional purchases - after being told the clearing firm was closing the CEO’s account and would allow only liquidating transactions.  As CCO, he failed to supervise firm personnel who had been delegated responsibility for reporting customer complaints and amending Forms U4 and U5 for the disclosable events.  (FINRA Case #2007007151703)

    2. Principal (Coral Springs, FL) fined $10K, suspended 6 months ...  for allegedly failing as Director of Compliance for trading to adequately supervise RR's who violated the '33 Act when they sold unregistered securities for customers.  Bush failed to ensure that the RR's ascertained whether the securities were registered, how and from whom the customers obtained their shares, whether and when the shares were paid for, and whether the transactions were subject to exemption from registration.  

As Designated Securities Compliance Officer ("DSCO") he should have been:  (i) supervising designated securities (penny stock) transactions for potential “pump-and-dump” or other fraudulent schemes;  (ii) reviewing for and investigating suspicious transactions - e.g., when numerous shares were deposited and immediately sold;  (iii) conducting background checks on customers who were expected to engage in a significant amount of designated securities transactions;   (iv) meeting with customers to ensure his firm had the requisite knowledge about customers’ background and trading intentions;  and, (v) reporting to the CCO and AMLCO any findings re: issuers or customers, as well as to certify monthly that he had completed such supervisory procedures.  Finally, he failed to take identifiable steps to ascertain relevant information re: customers’ disciplinary history and how they obtained the shares being deposited, and did not believe that customers’ background or numerous transactions constituted red flags.  (FINRA Case #2007007151702)

    3. Principal (Coral Springs, FL) fined $10K, suspended 1 year, required to take 8-hr AML training ...  for allegedly failing as AMLCO to implement reasonable/adequate pols and procedures for detecting, reporting suspicious transactions.  Bush failed to respond to red flags of money laundering and, when appropriate, to file SARs. As CCO, Bush failed to:  (i) adequately supervise firm AMLCOs and ensure they performed their AML supervisory functions - in all respects; (ii) to similarly oversee firm’s DSCO, who was to ID and investigate potential manipulative or fraudulent schemes - fact is, according to FINRA, many firm customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading;  (iii) ensure that customer complaints were reported to FINRA on a timely basis, and that Forms U4 and U5 were amended for disclosable events.   (FINRA Case #2007007151701)