Subscribe to our mailing list

* indicates required







We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.


Stay Informed with the latest fanancialish news.




Regulatory Sanctions

AML Sanctions for Small Private Placement Agent

April 20, 2018

by Howard Haykin


Small firms that deal in low numbers of transactions and involve limited numbers of retail or institutional customers can sometimes be lulled into complacency when it comes to compliance - like AML testing and customer ID programs. Yet, nobody gets a pass - just ask FINRA.


A NYC-based broker-dealer, whose primary line of business involves acting as a placement agent in private placements, agreed to pay a $20K fine to settle FINRA charges that it failed to conduct an independent test of its Anti-Money Laundering (“AML”) Compliance Program.


FINRA FINDINGS.    The firm, which was formed in 2007, has been a FINRA member since 2008, and employs 27 registered reps operating out of 4 branch offices, essentially engaged in 3 categories of violative conduct.


     1.  AML INDEPENDENT TESTING VIOLATION …  by failing to conduct an independent test of its AML Compliance Program for the calendar years 2013, 2014 and 2015. FINRA Rule 3310(c) requires that member firms that execute transactions on behalf of retail customers conduct annual independent testing of their AML program.


     2.  FAILURE TO IMPLEMENT A CUSTOMER IDENTIFICATION PROGRAM (“CIP”) … with respect to 33 individuals and entities who invested in 13 private placements from June 2013 through February 2016. The firm did not verify these 33 customers identities through either documentary or non-documentary methods, even though the its WSPs called for the Firm to obtain documentary evidence to verify the identity of all customers. Failure to conduct such verifications was in violation of FINRA Rule 3310(b).


     3.  BOOKS AND RECORDS VIOLATIONS ...   by failing to maintain any documents concerning the 33 investors who invested in the 13 private placements – including any subscription agreements and confirmations. The firm also failed to maintain account records required by Exchange Act Rule 17a-3(a)(17) and customer account information required by FINRA Rule 4512 with respect to these investors.


This case was reported in FINRA Disciplinary Actions for February 2018.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016047638801.