The Securities and Exchange Commission today charged a Wall Street-based brokerage firm with failing to sufficiently evaluate or monitor customers’ trading for suspicious activity as required under the federal securities laws.
An SEC investigation found that Albert Fried & Company failed to file Suspicious Activity Reports (SARs) with bank regulators for more than five years despite red flags tied to its customers’ high-volume liquidations of low-priced securities. On more than one occasion, an AF&Co customer’s trading in a security on a given day exceeded 80 percent of the overall market volume. In other instances, customers were trading in stocks issued by companies that were delinquent in their regulatory filings or involved in questionable penny stock promotional campaigns. Certain customers also were the subject of grand jury subpoenas received by AF&Co.
AF&Co agreed to pay a $300,000 penalty to settle the charges.
“Albert Fried & Company ignored numerous instances when customer trading activity should have triggered the firm to file SARs. Brokerage firms must take their anti-money laundering responsibilities seriously so they can serve as a line of defense against misconduct and market risks,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.
The SEC’s order finds that AF&Co violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8. AF&Co agreed to be censured and pay the $300,000 penalty without admitting or denying the findings in the order, which credits the firm for its cooperation and the remedial measures already undertaken.
While the SEC has charged other firms with anti-money laundering failures under the federal securities laws, this is the first case against a firm solely for failing to file SARs when appropriate.
The case stemmed from the work of the Enforcement Division’s Broker-Dealer Task Force, led by Associate Director Antonia Chion and New York Regional Office Director Andrew M. Calamari. The task force focuses on current issues and practices within the broker-dealer community and develops national initiatives for potential investigations.
The SEC’s investigation was conducted by Matt Reilly and supervised by Melissa Hodgman with assistance from Eric Kringel, Daniel Goldberg, Damon Reed, and Andrae Eccles of the Enforcement Division’s Bank Secrecy Act Review Group.