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.

OC Securities, Inc.
AWC/2010021779801

The Firm failed to properly implement its AML procedures to detect potentially suspicious transactions.

The AML procedures were created using a template for small firms available on the FINRA website which provided examples of red flags that would alert employees to suspicious activity. The firm failed to monitor for at least one of the red flags listed in its AML procedures that would alert employees to suspicious activity, and the firm conducted no review of potentially suspicious transactions involving penny stocks. The firm’s procedures did not address red flags associated with the receipt and/or sale of physical certificates of penny stocks and restricted securities by the firm or the type of due diligence required to be performed if a stock certificate was received.

Since the firm did not examine the physical stock certificates and did not perform any due diligence on stock certificates presented for deposit, the firm’s procedures were deficient, and the firm failed to implement the minimal procedures it did have to detect potentially suspicious activity. The Firm improperly relied on its clearing firm to conduct due diligence inquiries with regard to stock certificates presented for deposit into the firm’s customer accounts. In addition, although the firm’s procedures listed the red flags that could indicate suspicious activity, many of which were raised by the transactions at issue, the firm failed to review the trading activity to detect these potential red flags and to analyze them to determine if they were suspicious and reportable under the Bank Secrecy Act. As a result, the firm accepted approximately 130 stock certificates representing 439,344,949 shares of 52 different stocks without taking any independent action to learn and/or verify the facts and circumstances to determine if the transactions were suspicious and reportable.

OC Securities, Inc. : Censured; Fiend $30,000 (FINRA imposed a lower fine after it considered, among other things, the firm’s revenues and financial resources).

Tags: AML