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

WWW: Convergex Pays $3Mn for Years of AML Deficiencies

April 10, 2017

Convergex Execution Solutions of New York, NY agreed to pay $3,000,000 to settle FINRA charges that the firm failed to establish and implement an AML program that was reasonably designed to detect and cause the reporting of potentially suspicious transactions in microcap securities.


ABOUT THE RESPONDENT.    Convergex, a FINRA member since 1994, employs 235 registered persons working from 10 tbranch offices. Its business includes the introduction, execution and clearing of securities transactions for institutional customers. Convergex does not have any relevant disciplinary history


FINRA’S SPECIFIC FINDINGS.    For 7-1/2 years, from June 2008 through December 2015, FINRA found, that:


  • Convergex failed to reasonably detect and investigate red flags indicative of potentially suspicious activity in connection with certain transactions in microcap securities, which might have required the filing of a SAR.

► Between 2009 and 2012, it took on 3 U.S. direct customers for whom it provided custody, execution and clearing services in connection with the deposit and liquidation of nearly 47 billion shares of microcap stock.

► Between 2012 and 2014, it cleared liquidation transactions of close to 18.5 billion shares of microcap securities executed by a U.S. broker-dealer client.

► It executed transactions of microcap securities on a DVP basis for 3 foreign financial institutions (FFI’s), including the sale of more than 260 million microcap shares.


  • New account documentation for these customers did not mention microcap trading as anticipated activity.


  • Convergex failed to perform a periodic review of the 3 FFI’s as required under the Bank Secrecy Act


  • Convergex failed to tailor its AML compliance program and written AML procedures to identify suspicious transactions in microcap securities, even though conducting microcap liquidation transactions for customers was a new business for the firm.


  • Convergex’s risk rating system was flawed because it often underestimated risk presented by new customers. Accounts most active in microcap liquidation activity were designated as low risk, including the highest-volume direct customer, all three of the FFI’s and the U.S. broker-dealer client.


  • Convergex failed to identify and investigate red flags from such transactions as the following:

► the deposit of physical certificates of unregistered securities and their prompt liquidation into the market;

► trading activity in customer accounts that represented a large share of the trading volume of a given stock;

► liquidation of shares where public information existed, but was not accessed by the firm, to suggest that transactions were being effected as part of a pump and dump scheme.


This case was reported in FINRA Disciplinary Actions for February 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2014040667001.