Brokerage Fined for Anti-Money-Laundering Reporting Failures

Brokerage reporting failure
Brokerage reporting failure

Wall Street brokerage Albert Fried & Co. has agreed to pay $300,000 to settle charges that it failed to report suspicious trading by institutional customers.

For more than five years, the U.S. Securities and Exchange Commission said Wednesday, the firm filed no Suspicious Activity Reports (SARs) with bank regulators even though its customers’ high-volume liquidations of low-priced securities raised or should have raised red flags. The firm did not admit or deny the SEC’s findings.

On more than one occasion, an Albert Fried customer’s trading in a security on a given day exceeded 80% of the overall market volume, according to the SEC.

The Bank Secrecy Act requires broker-dealers to file an SAR if, among other things, they suspect a trade involves laundered funds. While the SEC has charged other firms with anti-money laundering violations, the case against Albert Fried is the first to allege a failure to file SARs.

“Albert Fried & Company ignored numerous instances when customer trading activity should have triggered the firm to file SARs,” Andrew Ceresney, director of the SEC’s enforcement division, said in a news release. “Brokerage firms must take their anti-money laundering responsibilities seriously so they can serve as a line of defense against misconduct and market risks.”

According to the SEC’s administrative order, the violations involved institutional investors who deposited hundreds of millions of shares of low-priced securities with Albert Fried. As the customers liquidated the shares, the firm allegedly failed to respond to or investigate suspicious activity.

“These sales were often in large volumes and constituted a substantial percentage of the daily market volume in the security,” the SEC said.

In others instances, the agency said, customers traded in stocks issued by companies that were involved in questionable penny stock promotional campaigns. One investor deposited with and sold through Albert Fried more than 119 million shares of four penny stocks over a four-month period, on one day alone trading 86.67% of the volume in one stock.

The firm also allegedly failed to file an SAR after learning that the president of one customer had been charged with engaging in a pump-and-dump stock manipulation scheme.

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