Aegis Capital Pays $1.3 Million for Anti-Money Laundering Violations
FINRA and the Securities Exchange Commission have fined Aegis Capital Corp., NY based Broker-Dealer, $550,000 and $750,000, respectively, in enforcement actions for Anti-Money Laundering (AML) Violations.
FINRA Fines Aegis Capital Corp. $550,000
On March 28th FINRA announced in a press release that they had fined Aegis Capital over half a million dollars for lack of compliance with AML programs while selling low-priced securities. They lacked a supervisory system for trading accounts that failed to meet it’s obligations to monitor and investigate trading accounts. FINRA found seven customer accounts dealing in billions of shares of low-priced securities, valued at millions of dollars. Aegis did not know the for whom some of these foreign financial institutions where trading on their behalf. Aegis clearing firm alerted AML “red flags” for this suspicious activity yet Aegis failed to target these trades for violations. Aegis lacked an adequate AML identification program designed to alter red flags for such sales.
Aegis consented to the FINRA findings, but settled the matter neither denying nor admitting the charges against them.
In it’s press release, FINRA cited to it’s 2018 Regulatory and Examination Letter which outlines AML issues of importance and of firm’s AML programs with policies designed to target and alert suspicious sales. These areas of concern relating to effective AML practices can be found in FINRA’s Examination Findings Report here.
Susan Schroeder, FINRA’s Executive Vice President for the Department of Enforcement highlighted the importance of AML compliance,
“It’s critical that firms have effective AML systems in place so that they can comply with their obligations to review suspicious transactions, including those involving trading in low-priced securities. . .[the] AML and supervision rules are important components of investor protection and market integrity, and member firms must have reasonably designed systems to ensure these rules are effectively implemented.”
The original enforcement action here.
The SEC charges Aegis $750,000 for AML Violatoins
The Securities Exchange Commission requires broker-dealers to file Suspicious Activity Reports (SARs) for transactions under suspicion of fraudulent activity. The Commission claims that Aegis failed to file SARs on low-priced securities transactions that raised red flags for potential market manipulation and AML violations. SEC findings allege that Aegis willfully violated financial recordkeeping and reporting rules.
Aegis agreed to pay the penalty and to retain the services of a compliance expert.
Antonia Chion, Associate Director and head of the Broker-Dealer Task Force of the SEC’s Enforcement Division, expressed the importance of compliance with regulations,
“Given the critical importance of SARs to the regulatory and law enforcement community, brokerage firms must comply with their SAR reporting obligations. Aegis failed to meet its AML obligations to report suspicious activity, including when it was faced with specific information alerting the firm to suspicious transactions.”
Aegis Compliance Officers Also Fined
Kevin McKenna, Aegis’s former AML compliance officer, is accused of aiding the firm’s violations. McKenna acquiesced to prohibition from providing Compliance or AML services for securities, along with a $20,000 fine. The Commission’s Enforcement Division also filed an order against a former Aegis compliance officer for failing to file the SARs for the firm. Eugene Terracciano has a litigated order against him for aiding, abetting, and causing the Aegis violations. Remedial actions for Terracciano await a judge’s decision.
Aegis CEO was fined $40,000 in penalties for causing the violations.
SEC order against McKenna here.
SEC order against Terracciano here.
The original SEC order against Aegis can be found here.