Aegis Capital Corp. will pay $1.3 million in fines after admitting it failed to file suspicious activity reports on deals that should have set off red flags for potential money-laundering activity, regulators said.
The firm's founder, sole owner and CEO, Robert Eide, was blamed by the SEC for causing the violations by failing to respond to reports of the suspicious activity. He was fined $40,000.
The New York City-based brokerage firm "willfully violated" SEC reporting and record-keeping rules in failing to report the deals and has agreed to pay a $750,000 fine, the Securities and Exchange Commission said in a press release Wednesday. The firm has also agreed to retain a compliance expert, the SEC said.
Finra announced a separate settlement in the case in which Aegis agreed to pay $550,000.
In addition to Eide, two other Aegis employees had administrative charges filed against them by the SEC for allegedly being responsible for the disclosure violations.
"Aegis failed to meet its AML (anti-money laundering) obligations to report suspicious activity, including when it was faced with specific information alerting the firm to suspicious transactions,” said Antonia Chion, associate director and head of the SEC's Broker-Dealer Task Force.
Responding to the complaints, the company's attorney said clients were not impacted.
“The referenced activity occurred more than four years ago, related to only seven (delivery-versus-payment) DVP accounts, and resulted in no harm to any Aegis clients," said Michael H. Ference, Aegis's attorney, in a prepared statement. "Aegis has long since exited this business line, and the brokers involved are no longer with the firm. Aegis is pleased to have satisfactorily resolved this legacy matter.”
The disclosure rules that Aegis violated are designed to detect suspicious security deals that could be an indication of money-laundering activity, according to Finra.
Aegis failed to file suspicious activity reports (SARs) on hundreds of low-priced security deals between 2012 and 2014 that "it knew, suspected, or had reason to suspect … involved the use of the broker-dealer to facilitate fraudulent activity or had no business or apparent lawful purpose," the SEC said in its complaint.