A broker-dealer settled charges with the SEC and FINRA, admitting that it had failed to file Suspicious Activity Reports ("SARs") concerning numerous suspicious transactions.
In the Order, the SEC stated that Aegis Capital Corp. ("Aegis") failed to file Suspicious Activity Reports ("SARs"), despite knowing or suspecting that the relevant transactions were facilitating unlawful activity or had no business purpose. The SEC stated that Aegis' clearing firm had alerted Aegis' former anti-money laundering ("AML") compliance officer to potentially suspicious activity. According to the SEC, the compliance officer ignored hundreds of potentially fraudulent transactions, including high trading volume in companies with minimal business activity. The SEC further alleged that Aegis did not create written analyses or compile any records indicating that it had considered filing SARs. In a separate Order, the SEC Enforcement Division charged a former AML compliance officer with failing to file SARs on behalf of Aegis.
FINRA also conducted an investigation into Aegis and found that it did not adequately supervise trading in delivery versus payment accounts, nor did it have programs in place to detect suspicious activity in low-priced securities.
Aegis agreed to pay a $750,000 penalty to the SEC and to retain a compliance expert. In a separate action, Aegis also settled charges with FINRA and agreed to an additional $550,000 penalty.
Commentary / Jodi Avergun
Law enforcement depends heavily on SARs to conduct investigations. Regulated entities must not only have compliant AML transaction monitoring systems to identify suspicious activity – they must also file the required reports once suspicious activity is identified. It is not enough to close accounts or remediate the conduct that allowed the transaction to occur. Informing law enforcement is equally critical.
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