- within Government, Public Sector, Intellectual Property and International Law topic(s)
A broker-dealer settled FINRA charges for failing to detect potentially suspicious insider trading and for failing to produce discovery in a FINRA arbitration proceeding.
In a Letter of Acceptance, Waiver and Consent, FINRA stated that the broker-dealer's AML procedures were deficient because they failed to detect that one of the broker-dealer's customers, who was known to the broker-dealer to be a corporate insider of a microcap issuer, was trading the stock of his own company. Further, FINRA claimed that the broker-dealer failed to implement its own AML procedures, including those requiring the timely review of microcap-related red flags. Had the broker-dealer followed its AML policies and procedures, FINRA said, the broker-dealer would have identified the insider trading transactions as suspicious.
FINRA also charged the broker-dealer with falsely claiming it did not have the documents it was required to produce in an arbitration proceeding that a former customer brought to FINRA's Dispute Resolution Forum. FINRA alleged that the broker-dealer had previously produced, in an unrelated matter, the documents it claimed not to possess.
FINRA determined that the broker-dealer violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3310 ("Anti-Money Laundering Compliance Program"), and IM-12000 ("Failure to Act under Provisions of Code of Arbitration Procedure for Customer Disputes").
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $60,000 fine, and (iii) review and revise its written AML program.
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