Orion Trading, LLC (CRD #43932, Orlando, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $50,000. See FINRA Case #2009019534204.
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it participated in the sale of shares of low-priced stock of issuers for customers, which generated proceeds of approximately $385,000 for the customers. The shares of stock were neither registered with the SEC nor exempt from registration. The findings stated that despite the questionable circumstances surrounding the transactions, the firm failed to conduct a searching inquiry to ensure that the sales did not violate Section 5 of the Securities Act of 1933.
The findings also stated that a registered representative completed Deposited Securities Request (DSR) forms and submitted them to the firm, which failed to ensure the information was accurate and consistent and did not raise any red flags. Instead, the firm relied on the representative to obtain all relevant information and documentation and determine that the shares were either registered or exempt from registration. The firm failed to reasonably supervise the sale of unregistered shares of low-priced stock of the issuers on the customers’ behalf.
The findings further included that the firm was responsible for establishing and maintaining a supervisory system, including written supervisory procedures (“WSPs”), to ensure compliance with all applicable securities laws, including Section 5 of the Securities Act of 1933. The firm failed to have procedures in place designed to prevent the sale of unregistered securities that were not exempt from registration, and failed to establish an adequate supervisory system to ensure that unregistered securities were freely tradable. FINRA found that the firm’s WSPs in effect required the firm to review transaction information, as well as information and reports its clearing firm provided, in an effort to spot red flags of suspicious activity that might be indicative of money laundering.
In addition, the procedures required the firm to file suspicious activity reports (“SARs”) when certain questionable activities were identified, including trading or journaling between/among accounts; late-day trading; heavy trading in low-priced securities; unexplained wire transfers, including those to known tax havens; and large deposits of funds or securities. The firm failed to identify, document and take appropriate steps with regard to certain red flags and suspicious activity in accounts involving some customers. Therefore, by failing to identify and investigate suspicious activity, and, where appropriate, file a SAR, the firm failed to implement and enforce an adequate anti-moneylaudering program.
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