Aegis Capital Fined $1.3 Million for Failing to File Suspicious Activity Reports
Aegis Capital Corporation, a New York-based brokerage firm, has admitted that it failed to file suspicious activity reports on numerous suspicious transactions, according to a complaint filed by the Securities and Exchange Commission.
Aegis Capital Corporation, a New York-based brokerage firm with 400 reps, was fined a combined $1.3 million by both the SEC and FINRA for failing to detect red flags or suspicious activity connected to its sale of low-priced securities. The SEC claims that Aegis admitted that it failed to file suspicious activity reports on certain suspicious transactions.
Broker-dealers are required to file SARs for certain transactions suspected to involve fraudulent activity or have no business or apparent lawful purpose. The SEC’s order found that Aegis failed to file SARs from at least late 2012 to early 2014 on suspicious transactions that raised red flags indicating the transactions were potentially related to the market manipulation of low-priced securities.
FINRA’s investigation found that Aegis failed to adequately monitor or investigate the trading in seven delivery versus payment, or 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.
FINRA claims that Aegis did not identify the trades as suspicious even after it was alerted by its clearing firm, nor did the broker-dealer have adequate AML programs in place to detect red flags associated with such sales.
“Aegis failed to meet its anti-money laundering obligations to report suspicious activity, including when it was faced with specific information alerting the firm to suspicious transactions,” said Antonia Chion, associate director and head of the broker-dealer task force of the SEC’s enforcement division. “Given the critical importance of SARs to the regulatory and law enforcement community, brokerage firms must comply with their SAR reporting obligations.”
The SEC’s order found that Aegis willfully violated an SEC financial recordkeeping and reporting rule. Aegis agreed to pay a $750,000 penalty and retain a compliance expert. FINRA also announced a settlement with Aegis that includes an additional $550,000 penalty. Aegis did not admit or deny wrongdoing in the FINRA matter,
In a separate settled order, Aegis’ former anti-money laundering compliance officer Kevin McKenna was found to have allegedly aided and abetted the firm’s violations. The SEC also claims that Aegis CEO Robert Eide “was found to have caused [the violations].”
Without admitting or denying the SEC’s findings, Eide and McKenna agreed to pay penalties of $40,000 and $20,000, respectively. McKenna also agreed to a prohibition from serving in a compliance or AML capacity in the securities industry with a right to reapply.
In a litigated order, the SEC’s enforcement division alleges that another former Aegis AML compliance officer, Eugene Terracciano, failed to file SARs on behalf of Aegis. Terracciano will be scheduled for a public hearing before an administrative law judge.
