Content of Penalty:
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Aegis Capital Corp. $550,000 for failing to have adequate supervisory and anti-money laundering (AML) programs tailored to detect "red flags" or suspicious activity connected to its sale of low-priced securities.
FINRA found that Aegis’ supervisory system for trading in delivery versus payment (DVP) accounts was not reasonably designed to satisfy its obligation to monitor and investigate trading in DVP accounts, particularly in low-priced securities transactions. In a DVP account, customers buy and sell securities that are not held at the brokerage firm executing the trades, and the purchases and sales of those shares are then effected through the brokerage firm. During its investigation, FINRA found that Aegis failed to adequately monitor or investigate the trading in seven DVP customer accounts that liquidated billions of shares of low-priced securities, generating millions of dollars in proceeds for its customers. Several of these customers were foreign financial institutions that effected transactions on behalf of their underlying customers, all of whom were unknown to Aegis. The firm did not identify these trades as suspicious even after its clearing firm alerted Aegis to AML red flags and specific suspicious low-priced securities transactions. These violations were accompanied by a failure to implement an adequate AML program tailored to detect red flags associated with these sales.