SEC Fines Three Broker-Dealers for Deficient Suspicious Activity Reports

The U.S. Securities and Exchange Commission announced that it has fined three separate broker-dealers a total of $275,000 for failing to include important, required information on their law enforcement suspicious activity reports, or SARs.

The Bank Secrecy Act and implementing regulations promulgated by the Financial Crimes Enforcement Network, or FinCEN, require broker-dealers to file SARs to report transactions that the broker-dealer has reason to suspect involve, among other things, funds derived from illegal activity. The SARs must contain “a clear, complete, and concise description of the activity, including what was unusual or irregular that caused suspicion.”

According to the SEC, each of the broker-dealers filed multiple deficient SARs over a four-year period from 2018 to 2022.

“Suspicious activity reports play a vital role in keeping our markets safe, and the failure of broker-dealers to include necessary information to explain suspicious transactions deprives law enforcement and regulatory agencies of valuable and timely intelligence, undermining the very purpose of the SARs,” said Jason Burt, director of the SEC’s Denver office.

Without admitting or denying the findings, the firms charged included:

• Webull Financial LLC, which agreed to pay a $125,000 civil penalty;
• Lightspeed Financial Services Group LLC, which agreed to pay a $75,000 civil penalty; and
• Paulson Investment Company LLC, which agreed to pay a $75,000 civil penalty.

The firms also agreed to be censured and to cease and desist from violating the charged provisions. Further, Webull and Paulson agreed to undertake a review of their anti-money-laundering programs by compliance consultants. The SEC stated that these resolutions reflect each of the firms’ cooperation after being contacted by SEC staff, as well as certain remedial measures taken by Lightspeed.

In similar news, FINRA fined Paulson Investment Company $100,000 earlier this year for failing to file required documents and information in regards to multiple public securities offerings.

Webull Financial is a New York-based broker-dealer that provides a self-directed investment platform and primarily serves retail investors.

With its principal place of business in Morristown, N.J., Lightspeed Financial Services Group is a broker-dealer that provides trading platforms it describes as “designed for the professional and active trader.” The firm was formerly known as Lime Brokerage LLC.

Based principally in Lake Oswego, Ore., Paulson Investment Company is a broker-dealer that specializes in executing orders from other broker-dealers, hedge funds and high-net-worth individuals, as well as making markets in various equities.

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