Recently, the Financial Institute Regulatory Authority, Inc. (“FINRA”) fined three broker-dealers, Atlas One Financial Group, LLC (“Atlas”), Firstrade Securities Inc., and World Trade Financial Corp. (“World Trade”), as well as several of their executives, for failure to establish and implement adequate anti-money laundering programs.
The FINRA Letter of Acceptance, Waiver and Consent (“AWC”) with Atlas states that between February 2007 and May 2011, Atlas failed to identify and investigate suspicious account activity which was flagged for possible money laundering issues. Indeed, in 2007, the United States Department of Justice froze six (6) accounts for one (1) Atlas customer in connection with a massive money laundering scheme. According to the AWC, Atlas required Napoleon Arturo Aponte (“Aponte”), who was Atlas’s Chief Compliance Office (“CCO”), Anti-Money Laundering Compliance Officer (“AMLCO”), Senior Vice President and Registered Options Principal, to monitor and investigate suspicious activity and anti-money laundering red flags, as well as report suspicious activity by filing a Suspicious Activity Report (“SAR”), which he failed to do. As a result of these findings, Atlas was fined $350,000, of which Aponte is jointly and severally liable for $25,000 of that amount. Moreover, Aponte is suspended from association with FINRA for three (3) months.
Similarly, in the beginning of May 2013, FINRA entered into an AWC with Firstrade for its failure to implement an adequate AML program to detect suspicious activity, including manipulative trading. Firstrade was heavily involved with Chinese issuer stocks, and according to the AWC, FINRA determined that some of the suspicious activity at issue was regarding pre-arranged trades of Chinese issuer stocks in related accounts. In this AWC, FINRA censured and fined Firstrade $300,000.
Furthermore, in early May 2013, FINRA entered into an AWC with World Trade, Frank E. Brickell (“Brickell”), its Financial and Operations Principal, and Rodney P. Michel (“Michel”) and Jason T. Adams (“Adams”), two equity traders. According to the AWC, World Trade, Brickell, Michel and Adams failed to establish and implement a supervisory system or written supervisory procedures, as required by the Bank Secrecy Act, to monitor and investigate suspicious and unlawful trading in unregistered penny stocks. Indeed, between March 2009 and August 2011, World Trade allowed 27.5 billion shares in 12 penny stocks to be bought and sold in one customer account, which generated $61 million in profits for that customer. World Trade processed all of these customer transactions despite the fact that the securities were not properly registered and were not eligible for exemption from registration. These transactions constituted the majority of World Trade’s business and revenue. As a result, World Trade was censured and fined $250,000, and was restricted from receiving unregistered securities for one year. Brickell was fined $40,000 and given a nine (9) month suspension from associating with any FINRA member firm in any capacity, except as a Financial and Operations Principal. Adams was fined $5,000 and given a three (3) month suspension from association with any FINRA member firm in a principal capacity. Michel was fined $35,000 and given a four (4) month suspension from associating with any FINRA member firm in any capacity.
Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters, including regulatory enforcement proceedings, and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.