The U.S. Securities and Exchange Commission (SEC) recently 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 investigation by the agency found that Albert Fried & Company (AF&Co) failed to file Suspicious Activity Reports (SARs) with regulators for over 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% 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.
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Andrew Ceresney, director of the SEC’s Division of Enforcement, commented:
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.
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.
AF&Co agreed to pay a $300,000 penalty to settle the charges.
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