NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Chapin, Davis
AWC/2010021065701

The Firm failed to develop and implement a reasonably designed anti-money laundering (AML) compliance program (AMLCP).

The firm’s written procedures, which contained information primarily relating to customer identification procedures (CIP),

• offered little or no guidance on how to comply with most requirements of the Bank Secrecy Act;
• contained no provisions on conducting customer due diligence and enhanced due diligence, and insufficient guidance on responding to, and properly documenting responses to, information requests the United States Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued pursuant to Section 314(a) of the U.S.A. PATRIOT Act; and
• did not address how to monitor for and report suspicious activity, and the firm failed to conduct an adequate independent test of its AMLCP. FINRA found that the testing, which an independent auditor performed, was deficient by failing to test the firm’s implementation of a suspicious activity report (SAR) surveillance program, AML training program and Bank Secrecy Act requirements, including customer identification procedures.

FINRA also found that the firm failed to

• establish, maintain and/ or enforce a supervisory system and written procedures reasonably designed to record and supervise private securities transactions, and failed to record such transactions; and
• make and keep current all account forms in compliance with Securities Exchange Act Rule 17a-3(17), and NASD Rules 3110(a) and (c).

Chapin, Davis : Censured; Fined $50,000

Tags: AML  CIP  SAR