Acting through Hernandez, Global Strategic failed to:
The Firm and Hernandez permitted foreign customers to deposit funds into their accounts and, within days and/or weeks, disburse funds from their accounts to first and third parties, and in certain instances in amounts slightly below $10,000; although one customer told Hernandez he did this to avoid questions from his bank, the firm and Hernandez permitted the activity to continue and did not file a Form SAR-SF until approximately one year after the activity occurred.
Global Strategic Investments, LLC: Censured; Fined $150,000
Cesar Gabriel Hernandez: Fined $25,000; Suspended 3 months in Principal capacity only
While acting as his member firm’s Anti-Money Laundering Compliance Officer (AMLCO), Diemer failed to
The Firm is an introducing firm that maintains “piggyback” arrangements with foreign broker-dealers and executes their transactions with a clearing firm. Many of these suspicious activities occurred in accounts of foreign broker-dealers with whom the firm had a piggyback relationship, and Diemer failed to conduct an adequate investigation into these activities and did not file as appropriate, any SARs.
Finally, Diemer failed to appear for a FINRA on-the-record interview.
The Firm operated a deficient Anti-Money Laundering (AML) program and failed to detect, investigate and report suspicious activity in connection to a firm customer’s participation in a fraudulent stock-lending scheme through the firm’s accounts.
The findings Firm's clearing firm advised it of a “negative hit” (any criminal, regulatory or civil action history) for an individual involved with a corporation that completed an online application to open an account at the firm through its trading direct division; after learning of the criminal action against the individual, the firm did not directly confront the individual or anyone associated with the corporation but instead, sent an email to the individual asking only whether or not it was correct that the individual had had a material monetary problem with a government agency, and the individual responded, confirming and stating the issue was resolved and there was no debt owed. The Firm informed the individual that it would open an account for the corporation on a cash only basis (i.e., no margin privileges).
The Firm's knowledge regarding the individual’s criminal record was a red flag that should have caused it to give heightened scrutiny to activity in the corporation’s account, but during a five month period, there were shares of securities valued at more than $12 million delivered into the corporation’s account, in some instances by deposit of physical certificates. These shares were then sold within days of being received into the account, and the proceeds were then wired to a domestic bank account in the name of the corporation; the firm did not investigate any of these transactions or deem them to be suspicious and did not speak with anyone at the corporation regarding the transactions. The day after a customer presented a share certificate, he sent the firm a letter of authorization requesting the firm transfer the shares from his account to the corporation’s account at the firm, and one week after the shares were transferred, the corporation sold the shares in separate sales transactions and the proceeds were wired to the corporation’s domestic bank account. In addition, the sales of the stock, just a week after they were transferred from the customer to the corporation, were further red flags that should have caused the firm to ask additional questions concerning the transactions and consider filing suspicious activity reports (SARs).
Moreover, the Firm never followed up with the corporation to learn about the nature of its business activities and never obtained additional information regarding the fact it identified itself as a "loan underwriter" in its new account documents. Furthermore, the Firm did not follow its written customer identification program (CIP) procedures for individual customers domiciled in the United States; instead, the firm submitted customer names to its clearing firm to perform searches, which did not fulfill the firm’s CIP responsibilities. For customers who were individuals domiciled in the United States, there was no record maintained as to how verification occurred, and no records as to whether the firm utilized documentary or non-documentary means for verification existed or were retained. In light of the firm’s failure to conduct non-documentary checks, and failure to maintain records of the information used to verify customer identification, its CIP with respect to accounts for individuals domiciled in the United States was inadequate and failed to meet the standards of Section 326 of the Patriot Act, resulting in a willful violation of MSRB Rule G-41.
Acting in his capacity as the AMLCO, Brown failed to
Brown was notified by his member firm’s clearing firm that it was closing the CEO’s account and would allow only liquidating (sell) transactions, but although Brown responded to the clearing firm, he did not adequately follow up to ensure additional purchase transactions did not take place—which did occur. As his firm’s CCO, Brown failed to supervise firm personnel who had been delegated responsibility for reporting, and timely reporting, customer complaints under NASD Rule 3070(c), and to make Forms U4 and U5 amendments with FINRA to report disclosable events.
Newbridge facilitated the manipulative trading of the stock of a company created as the result of a reverse merger.
A group of control persons and promoters used accounts at the firm to execute pre-arranged in-house agency cross and wash transactions that were intended to generate volume and support or increase the price of the stock. The firm permitted control persons to sell unregistered securities through firm accounts, and the sales were not made in compliance with any applicable exemption from registration. The firm failed to
Further, the Firm failed to adequately supervise registered representatives who participated in the manipulative trading.
The firm did not have adequate systems or controls to implement and enforce its policies, particularly adequate systems to detect improper cross, wash and other manipulative trading. The firm’s AML procedures required the firm to investigate red flags indicating suspicious activity or trading, and to investigate and take appropriate steps, including limiting account activity, contacting a government agency or filing a SAR, but the firm failed to follow its AML program in regard to the manipulative trading, unregistered distributions and other suspicious activities.
The firm failed to report, or timely report, customer complaints reportable under NASD Rule 3070(c). In addition, firm failed to file Forms U4 or U5 to report disclosable events and failed to timely amend a Form U4 to report a disclosable event.
Acting in her capacity as her member firm’s AMLCO, Bush failed to implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations thereunder.Bush failed to ensure her firm’s overall compliance with NASD Rule 3011 by detecting and investigating suspicious activities or other activities in which red flags of money laundering were present and, when appropriate, filing SARs.
As her firm’s CCO, Bush failed to adequately supervise firm AMLCOs and ensure they were performing their functions pursuant to the firm’s AML program and written procedures, and failed to ensure they were properly investigating suspicious activities, recommending and filing SARs or documenting the rationale for concluding that a SAR was unnecessary.
Bush failed to adequately supervise the firm’s DSCO to ensure he was taking adequate investigative steps to ascertain whether certain customer transactions were part of a manipulative or fraudulent scheme, conducting adequate criminal or securities disciplinary background checks, and conducting adequate due diligence to ascertain whether customers engaging in significant designated securities transactions had any affiliations with the issuers; in fact, many customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading.
As her firm’s CCO, Bush failed to ensure her firm reported, and timely reported, customer complaints to FINRA. FINRA also found that Bush failed to ensure her firm filed, and timely filed, Forms U4 and U5 with FINRA to report disclosable events.
Acting through Anthony DiGiovanni Jr., Seaboard participated in the distribution of unregistered thinly traded securities for firm customers that resulted in proceeds over $3.8 million from the customers and approximately $400,000 in gross commissions for the firm, and failed to perform an adequate inquiry to determine the registration or exemption status of the shares, including failing to make any inquiries to determine the circumstances of how its customers received their shares of unregistered stock, the customers’ relationships with the relevant issuers, or any other relevant facts or circumstances that could have revealed whether the shares were, in fact, exempt from registration. The firm accepted the self-serving statements of its customers and counsel that the shares were exempt and ignored “red flags” indicating the customers and the firm were participating in a scheme to evade registration requirements.
Acting through DiGiovanni Sr., Seaboard failed to adequately supervise DiGiovanni Jr. in his participation in the sales of unregistered securities. DiGiovanni Sr. reviewed the firm’s trade blotters on a daily basis and was aware of the customers’ trading activity and also approved new account documents that raised red flags, but failed to take any action to investigate or prevent the firm’s or DiGiovanni Jr.’s participation in, and illegal sale of, unregistered securities.
Acting through Still, as compliance officer, Seaboard
Moreover, FINRA found that the firm and Still should have detected the suspicious nature of the customers’ liquidation of their penny stocks, investigated the activity and made the appropriate Suspicious Activity Reports (SAR) filings.
Seaboard Securities, Inc.: Fined $125,000, of which $10,000 was jointly and severally with DiGiovanni Sr. and $10,000 was jointly and severally with Still;
Ordered to retain, within 60 days of the date of the Order accepting the Offer of Settlement, an independent consultant to conduct a comprehensive review of the adequacy of the firm’s AML program and its policies, systems and procedures (written and otherwise) and training relating to determining whether securities are freely tradable; the independent consultant is required to submit to FINRA a written report addressing these issues and making recommendations. The firm shall submit to FINRA a written implementation plan, certified by a firm officer, of its implementations of the consultant’s final recommendations. Furthermore, until the firm provides FINRA with the written implementation report, the firm shall be prohibited from selling any securities deposited in certificate form or by Deposit Withdrawal At Custodian (DWAC) unless the stock has been held in an account at the firm for at least one year; and the firm retains an opinion from counsel retained by the firm opining that the stock may be sold in compliance with Section 5 of the Securities Act of 1933.
Anthony Joseph DiGiovanni Sr.: Fined $10,000 jt/sev with Seaboard; Suspend in Principal capacity only 45 days
Sonya Terez Still: Fined $10,000 jt/sev with Seaboard; Suspend in Principal capacity only 30 days
Anthony Joseph DiGiovanni Jr.: Fined $35,000, which includes the disgorgement of $25,000 in financial benefits received; Suspended 45 days.
The Firm sold stock shares of issuers that were not registered with the SEC for which no exemption from registration applied, which generated, through the transactions, proceeds of approximately $790,000 for customers; and failed to conduct a “searching inquiry” to ensure that the sales did not violate Section 5 of the Securities Act. The Firm failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to ensure compliance with applicable rules and regulations regarding the distribution of unregistered and non-exempt securities, and, in particular, its acceptance of the delivery of stock shares in certificate form and its subsequent sales of the same. The Firm's written supervisory procedures did not require an inquiry to be conducted into whether deposited stock shares were registered with the SEC or exempt from registration.
The Firm failed to identify activity in corporate accounts as suspicious, investigate it and report it through Form SAR-SF filings and, therefore, failed to implement or enforce its AML program by failing to identify suspicious activity, properly investigate it and file a Form SAR-SF on such activity, as appropriate.
Acting through its chief compliance officer (CCO), the firm:
Acting through a registered representative, the firm
Acting through the registered representative and CCO, the firm failed to perform adequate searching inquiries and take necessary steps to ensure that transactions did not involve distributions of unregistered and/or restricted securities.
Acting through a registered representative and firm principal, the firm sold securities to public investors using a private placement memorandum that omitted to disclose a convicted felon’s association with the issuer, a material fact to any reasonable investor.
Acting through various FINOPs, the firm
Acting through the CCO and other compliance officers, the firm
The firm had additional supervisory deficiencies, including that
Acting through a supervising principal, the firm failed to reasonably supervise registered representatives working out of the unregistered branch office.
Acting through firm officers, the firm failed to establish and maintain a supervisory system reasonably designed to supervise the sales activities of firm personnel conducted outside of its registered offices, and failed to establish and maintain a supervisory system for determining whether customer securities were properly registered or exempt from registration.
Acting through its CCO, the firm failed to implement adequate procedures to ensure that the firm did not telephone persons who stated they did not wish to receive calls and/or who registered on the national do-not-call registry, and failed to adequately update and maintain a do-not-call list.
Acting through various supervisors, the firm failed to perform heightened supervision over numerous individuals.