SEC Sets Sights on Brokers Failing to Flag Money LaunderingAlan Katz
The U.S. Securities and Exchange Commission has opened several investigations as part of a new initiative to root out brokers turning a blind eye to illicit trading, an agency official said.
The SEC opened dozens of probes after finding that a “disturbingly large” number of the 4,800 U.S.-registered brokers had reported zero or few instances to regulators of possibly illegal trades over extended periods of time, SEC Enforcement Director Andrew Ceresney said in a speech Wednesday in New York.
“These findings are troubling, and suggest a need for further investigation,” said Ceresney, who was speaking at a Securities Industry and Financial Markets Association conference. “Judging by the numbers, I find it hard to believe that the industry as a whole is fulfilling its obligations.”
The SEC’s efforts come amid heightened scrutiny of money laundering. New York’s banking regulator floated a plan on Wednesday to spot-check banks’ money-laundering controls and hold executives accountable if they fail.
Brokers are required by the Bank Secrecy Act to file suspicious activity reports, or SARs, when they identify customers or trades that could be violating anti-money laundering laws. The SEC is focusing on firms that didn’t submit any SARs for long periods, those that provided scant data in the forms, and those that routinely dealt with customers identified in SARS by other firms, Ceresney said.
The agency has already taken action against brokers for lax controls.
Oppenheimer & Co. agreed last month to pay $20 million to settle claims that it improperly sold billions of penny-stock shares without reporting red flags about its client. In November, Wedbush Securities Inc. agreed to pay $2.44 million for failing to vet clients who broke stock-market rules and admitted that it didn’t have adequate risk controls before it allowed customers access to the market.