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Regulation and Compliance > Federal Regulation > SEC

Broker-Dealer Admits It Failed to File Suspicious Activity Reports

By Emily Zulz

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A New York-based brokerage firm admitted that it failed to file Suspicious Activity Reports (SARs) on numerous suspicious transactions, according to the Securities and Exchange Commission.

Broker-dealers are required to file SARs for certain transactions that are suspected to involve fraudulent activity or that have no business or apparent lawful purpose.

The SEC’s order found that Aegis Capital Corp. failed to file SARs on suspicious transactions that raised red flags indicating the transactions were potentially related to the market manipulation of low-priced securities.

“Aegis failed to meet its [anti-money laundering] obligations to report suspicious activity, including when it was faced with specific information alerting the firm to suspicious transactions,” Antonia Chion, associate director and head of the Broker-Dealer Task Force of the SEC’s Enforcement Division, said in a statement.

The SEC’s order found that Aegis willfully violated an SEC financial recordkeeping and reporting rule.

“Given the critical importance of SARs to the regulatory and law enforcement community, brokerage firms must comply with their SAR reporting obligations,” Chion said in a statement.

Aegis agreed to pay a $750,000 penalty and retain a compliance expert. FINRA also announced a settlement with Aegis today that includes an additional $550,000 penalty.

In a separate settled order with the SEC, Aegis’ former AML compliance officer Kevin McKenna was found to have aided and abetted the firm’s violations, and Aegis CEO Robert Eide was found to have caused them.

Without admitting or denying the SEC’s findings, Eide and McKenna agreed to pay penalties of $40,000 and $20,000, respectively. McKenna also agreed to a prohibition from serving in a compliance or AML capacity in the securities industry with a right to reapply.

In a litigated order, the SEC alleges that another former Aegis AML compliance officer, Eugene Terracciano, failed to file SARs on behalf of Aegis. Terracciano is alleged to have aided and abetted and caused Aegis’ violations. The matter pertaining to Terracciano will be scheduled for a public hearing before an administrative law judge.

Emily Zulz

@think_emilyz

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