Aegis Capital Corp. (“Aegis”, CRD# 15007) was recently fined by both the SEC and FINRA in connection with allegations concerning the firm’s purported failure to supervise suspicious penny stock transactions in certain customer delivery versus payment (“DVP”) accounts. Specifically, based on its investigation, FINRA alleged that “Aegis failed to adequately monitor or investigate the trading in seven DVP customer accounts that liquidated billions of shares of low-priced securities, generating millions of dollars in proceeds for its customers.” Of considerable concern to both the SEC and FINRA, Aegis allegedly failed to identify these trades as suspicious even after its clearing firm put Aegis on alert of various Anti-Money Laundering (“AML”) red flags surrounding “suspicious low-priced securities transactions.”
On Wednesday, March 28, FINRA announced a fine of $550,000 against Aegis for its alleged supervisory failures. Further, the SEC penalized Aegis $750,000 after the brokerage firm admitted that it failed to file required suspicious activity reports (“SAR’s”) on numerous penny stock transactions. Additionally, Aegis’ CEO, Robert Eide, was fined $40,000 by the SEC in a separate action concerning the broker-dealer’s failure to file SARs from “at least late 2012 through early 2014.”
Formed in January 1984 and headquartered in New York, New York, Aegis is a mid-sized, full service retail and institutional broker-dealer. As of March 2017, Aegis employed approximately 415 brokers in its sixteen branches. The bulk of Aegis’ branch office network is located in New York City and Long Island, NY, in addition to a presence in New Jersey, Connecticut, Texas, Florida, Oregon, South Carolina, and Puerto Rico.
According to public records, Aegis’ regulatory history includes a total of thirty disclosure events, including an August 2015 settlement with FINRA, pursuant to which Aegis agreed to pay $950,000 in sanctions over allegations of improper sales of unregistered shares of ‘penny stocks’, as well as certain AML violations. In connection with the 2015 regulatory event, two of Aegis’ compliance officers were suspended for 30 and 60 days, respectively, and ordered to pay fines of $5,000 and $10,000, respectively.
Brokerage firms like Aegis have a duty to ensure that they have in place a compliance system which includes specific written supervisory procedures concerning compliance with their AML responsibilities. Both the SEC and FINRA have indicated that heavy trading in low-priced securities or penny stocks could be an indicator of potential market manipulation and/or money laundering activity. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.
Attorneys at Law Office of Christopher J. Gray, P.C. have successfully represented investors in a number of disputes involving losses sustained due to instances of alleged fraudulent conduct and market manipulation. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at firstname.lastname@example.org for a no-cost, confidential consultation.