BROWSE BY TOPIC
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Bad Brokers
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Big Banks
- Regulatory Sanctions
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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.
NEWSLETTERS & ALERTS
Revere Securities and Ex-BOM Settle FINRA Microcap/AML Charges
by Howard Haykin
Revere Securities agreed to pay a $75K fine to settle FINRA charges that, among other things, the firm failed to develop and implement AML adequate policies and procedures for the detection and reporting of potentially suspicious activity relating to transactions involving the deposit and liquidation of millions of shares of microcap stocks.
Kurt Hurst, a former branch manager, agreed to pay a $5K fine and to not serve in a ‘principal capacity’ for 2 months to settle FINRA charges that he failed to adequately supervise suspicious microcap stock activities by one registered rep’s customers.
NOTE: For Financialish TakeAways on this case, click on: "CCO Culpability for Weak WSPs Related to Microcap Stocks."
FINRA FINDINGS. In April 2013, a new registered rep (“RR”) joined the firm. Hurst and the representative knew, at the time the representative was on-boarded, that his clients regularly engaged in microcap stock transactions. After the RR joined the firm, many of his customers deposited microcap stocks in physical certificate or electronically, and then proceeded to liquidate those positions and have the proceeds wired out shortly thereafter. All told, the RR’s customers liquidated more than 23 million shares of microcap stocks that generated proceeds of approximately $889,000.
Revere Securities’ Shortcomings.
- The firm’s AML procedures were not sufficiently tailored to a microcap stock liquidation business and the associated regulatory risks, including the use of such securities by issuers, stock promoters and others affiliated with the issuers for money laundering or to commit securities fraud or market manipulation.
- The firm’s system for reviewing for potentially suspicious trading activity consisted primarily of its manual review of daily trade blotters
- This manual review was not reasonably designed to detect patterns of potentially suspicious activity that might occur over the course of days, weeks or months.
- The firm’s system for detecting and investigating red flags relating to the microcap stock activities of representative’s customers also was unreasonable.
Kurt Hurst’s Shortcomings.
- As branch manager, Hurst was responsible for approving securities deposits and for monitoring the customer activity that followed, including potentially suspicious activity.
- Hurst failed to identify any of the deposit and liquidation activity of the RR’s customers as potentially suspicious.
- Hurst also failed to escalate any of the deposit and liquidation activity to the firm’s AML Compliance Officer.
- The firm and Hurst failed to identify any of the RR’s customers’ activities as potentially suspicious notwithstanding the existence of red flags, such as …
► Deposit and liquidation of the same microcap stock by several of the RR’s clients in a short timeframe;
► Clients with problematic criminal, civil or regulatory histories; and,
► Promotional activity.
- The firm and Hurst conducted no due diligence or investigations with respect to electronic deposits of microcap stocks and therefore made no determination that those microcap stocks were registered and free from restriction.
- For physical certificates of microcap stocks, the firm and Hurst failed to conduct reasonable due diligence before executing sales of microcap stocks to verify that the transactions were either registered or exempt from registration.
This case was reported in FINRA Disciplinary Actions for November 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2014039396101.