Aegis Capital fined $1.3 million for failing to red flag overseas penny stock trades

Firm admitted it failed to file 'suspicious activity reports' on numerous suspicious transactions, the SEC says.

Mar 28, 2018 @ 2:47 pm

By Bruce Kelly

Aegis Capital Corp. was fined $1.3 million Wednesday for failing to flag suspicious trades as well as for having poor anti-money laundering programs to detect so-called red flags in its sale of penny stocks.

Robert Eide, the owner and CEO of Aegis Capital, which is based in New York and has about 400 brokers under its roof, "was found to have caused" the firm's infractions, according to a news release from the Securities and Exchange Commission. He was fined $40,000 by the SEC in a separate action.

"The referenced activity occurred more than four years ago, related to only seven delivery versus payment accounts, and resulted in no harm to any Aegis clients," said the firm's attorney, Michael Ference. "Aegis has long since exited this business line, and the brokers involved are no longer with the firm. Aegis is pleased to have satisfactorily resolved this legacy matter."

The SEC penalized Aegis $750,000 after it admitted that it failed to file "suspicious activity reports" on numerous suspicious transactions, the agency said.

"The SEC's order found that Aegis failed to file [the reports] on suspicious transactions that raised red flags indicating the transactions were potentially related to the market manipulation of low-priced securities," according to the SEC.

Meanwhile, the Financial Industry Regulatory Authority Inc. fined Aegis Capital $550,000 for "failing to have adequate supervisory and anti-money laundering programs tailored to detect 'red flags' or suspicious activity connected to its sale of low-priced securities," according to a press release from Finra.

Low-priced securities can include penny stocks.

From at least late 2012 to early 2014, Aegis "failed to file [suspicious activity reports] on low-priced securities transactions and did not create written analyses or compile other records indicating that they considered filing" the reports, according to the SEC.

"Aegis' employees — including those employees responsible for reviewing trades — never received any training from Aegis that included examples of the red flags associated with low-priced securities transactions that were outlined in the firm's written supervisory procedures," the SEC said.

"During its investigation, Finra found that Aegis failed to adequately monitor or investigate the trading in seven customer accounts that liquidated billions of shares of low-priced securities, generating millions of dollars in proceeds for its customers," according to Finra. "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."

One former Aegis anti-money laundering officer was fined $20,000 by the SEC while another AML compliance officer will have a public hearing before an administrative law judge, according to the SEC.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Featured video

Events

Dave O'Brien: Choosing the right tech for a growing practice

When your practice reaches a certain inflection point, technology becomes even more critical. What do you need to take you and your practice to the next level?

Latest news & opinion

10 fastest-growing IBDs

These independent broker-dealers saw the biggest percentage gains in their revenue in 2017.

The unique nature of working with celebrity clients

Athletes and entertainers are just like everyone else — aside from complex tax issues, a lack of financial savvy and a need for prenups

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print