The SEC alleges that Windsor allowed clients to sell hundreds of millions of unregistered penny stocks through Windsor brokerage accounts and did not report the suspicious transactions to the U.S. Treasury Department.
The Windsor clients bought stock in dormant shell companies, spread false information to promote the companies’ products and then dumped the shares as other investors bought in at inflated prices, the SEC alleges in a case that is still pending.
Windsor made about $500,000 in commissions and fees from transactions related to the scheme, according to the SEC.
When asked if FINRA investigators contributed to the SEC’s investigation, an SEC official declined to comment and pointed to the agency’s press release, which only credits SEC investigators.
FINRA did not respond to requests for comment on whether it had a role in the Windsor investigation.
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At Long Island-based Joseph Stone Capital, 71 percent of the firms’ 59 brokers had FINRA flags on their records, according to the Reuters analysis.
Joseph Stone was investigated by the state of Montana after one of its sales representatives, Lawrence Sullivan, cold-called the office of Montana’s Commissioner of Securities and Insurance to pitch an investment on January 15, 2016, according to a report on the incident by the regulator.
The securities commission launched an investigation into the firm after the call, during which Sullivan quickly backtracked and denied he was pitching securities, according to the report.
Reuters could not reach Sullivan for comment. The staffer he called - Patrick Navarro, an assistant analyst at the state regulator - did not respond to requests for comment.