The Financial Industry Regulatory Authority (FINRA) is ordering Cantor Fitzgerald to pay $7.3 million for selling billions of unregistered microcap shares in 2011 and 2012. The firm is also facing sanctions for not having the proper supervisory /anti-money laundering programs in place to identify suspect activity or red flags related to microcap activity.
According to the self-regulatory organization, the Cantor Fitzgerald’s supervisory system was not designed in a reasonable enough manner to fulfill its obligation to assess whether the microcap securities it was liquidating for clients were SEC-registered or, if not, then were subject to a registration exemption. FINRA said that after Cantor Fitzgerald decided to broaden its microcap liquidity business in 2011, it did not make sure its supervisory system had a meaningful and reasonable way to determine whether the sales of these securities occurred in compliance with the law. Also, said the regulator, the firm did not provide proper guidance and training about how or when to look into whether a sale was exempt from SEC registration, and supervisors were not given the tools that they needed to identify when red flags were an indicator of unregistered, illegal distributions.
Because of this, said FINRA, Cantor Fitzgerald and equity trader Joseph Ludovico sold billions of shares of thinly traded microcap securities without proper due diligence and review. Ludovico has been suspended for two months and must pay a $25,000 fine. The firm’s Equity Capital Market’s executive managing director Jarred Kessler was suspended for three months. He must pay a $35,000 fine for supervisory failures.
Cantor Fitzgerald will pay a $6 million fine and almost $1.3 million in disgorgement of commissions plus interest. The firm is settling the charges without denying or admitting to them. Cantor Fitzgerald is, however, consenting to the regulator’s findings.
If you suspect that your financial losses are due to securities fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our microcap fraud lawyers are here to offer you a free case consultation.
FINRA Sanctions Cantor Fitzgerald & Co. $7.3 Million for Selling Billions of Unregistered Microcap Shares, and for Related Supervisory and AML Violations, FINRA, December 21, 2015