Three Brokerage Firms Are Sanctioned by FINRA for Inadequate Anti-Money Laundering Programs

In May 2013, the Financial Industry Regulatory Authority (FINRA) fined three brokerage firms a total of $900,000 for failing to maintain proper anti-money laundering (AML) programs designed to detect suspicious financial transactions.  The firms are Atlas One Financial Group in Miami, Florida, Firstrade Securities in Flushing, New York, and World Trade Financial in San Diego California. 

AML requirements are important tools to protect investors against a wide range of illicit activities.  According to FINRA, Atlas One repeatedly failed, over a period of several years, to identify suspicious account activity or did not adequately investigate numerous AML “red flags” involving a pattern of activity consisting of the movement of millions of dollars through various questionable accounts.  With regard to Firstrade, FINRA determined that the firm failed to implement an adequate AML program designed to detect and prevent suspicious transactions including potential manipulative trading in a variety of Chinese issuer stocks.  As for World Trade Financial, FINRA determined that the firm failed to create supervisory procedures designed to monitor for unlawful transactions in unregistered penny stocks. 

FINRA’s actions should serve as important warnings to firms to ensure that their AML are effectively designed and enforced to detect and prevent illicit financial transactions.  Federal law requires financial institutions to adopt meaningful protections against money laundering and other illegal activities, and such procedures are necessary to guard against well-known fraudulent schemes that are perpetrated against investors.

If you believe you have been the victim of securities fraud, please contact Block & Landsman for a free, confidential consultation.

SEC & FINRA Warn Investors on Income Stream Products

The Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) issued an investor alert concerning the risks involved when selling the rights to an income stream or investing in someone else’s income stream.  Investor alerts are statements issued by the SEC and FINRA seeking to raise public awareness about suspicious activities in the securities markets.  This particular investor alert can be viewed here.

Lori J. Schock, Director of the SEC’s office of Investor Education and Advocacy, stated, “Investors should always learn as much as possible before making an investment decision, and this is certainly true with respect to investing in pension or structured settlement income stream products.”  This particular invest alert was brought about because of the increased popularity of income stream products, and seeks to educate investors about inherent potential pitfalls in pension and settlement income stream products. 

One potential pitfalls include the high fees usually associated with these products.  Yet another is the fact these product may not be considered “securities” under US law and are likely not registered with the SEC.  Also, investors should consider the non-liquid nature of these products, as they may be difficult to sell in the event you need the capital you invested in the products. 

If you have purchased a pension or settlement income stream product and believe there has been suspicious activity surrounding your purchase, please contact the attorneys at Block & Landsman to discuss your legal options.