“Quis custodiet ipsos custodes?” Juvenal, an ancient Roman poet, asked this question in his second-century Satires, when he pondered who would be charged with “guarding the guards.” The SEC indicated that its Enforcement Division is quite willing to undertake that task, as a former chief compliance and anti-money laundering (AML) officer for a broker-dealer agreed to a securities industry ban for his failure to properly respond to nearly $25 million worth of suspicious transactions.
As charged by the SEC, Meyers Associates, a New York-based broker-dealer, did not file suspicious activity reports (SARs) as required by statute and SEC rules. John David Telfer, the firm's chief compliance offer, was personally responsible for ensuring that the firm filed all required SARs with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The violations at issue related to the firm's penny stock liquidation business, where it routinely accepted physical deposits of large blocks of penny stock shares and liquidated them. Customers would then transfer the sale proceeds out of their accounts. According to the SEC, the firm’s written AML program identified this particular pattern of conduct as a “red flag” that should trigger additional investigation as to whether a SAR filing would be necessary. Despite the AML program requirements, however, Telfer allegedly performed no investigation into any of the suspicious transactions. The SEC also charged that the shares involved could not be sold legally because they were not registered under the Securities Act and no registration exemption was available. Rather than conduct a reasonable inquiry into the deposits, the firm allegedly accepted the customers’ claimed registration exemptions at face value.
The suspicious trading occurred in accounts controlled by microcap stock financiers Raymond H. Barton and William G. Goode. The SEC separately charged these individuals and others with conducting a pump and dump scheme.
The transactions also presented other indications that Barton and Goode were engaged in a fraudulent scheme, including:
The SEC alleged that various parties, including his employer’s clearing firm, brought these red flags directly to his attention, Telfer still knowingly or recklessly failed to file the required SARs with FinCEN. Telfer consented to the entry of an industry bar order, and agreed to pay a $10,000 civil penalty, without admitting or denying wrongdoing.
“The SEC’s Broker-Dealer Task Force AML initiative is focused precisely on the conduct charged against Meyers Associates, which we allege systematically flouted its obligations under the securities laws to report suspicious activity,” said Andrew M. Calamari, director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker-Dealer Task Force. He added that “when other brokerage firms were rejecting similar deposits by Barton and Goode, Meyers Associates not only effectuated their illegal stock sales but then failed to report them as required by law.”
Juvenal may rest comfortably, because, according to a free online English to Latin translator, sequitur tenor Commissionis custodiens cum custodibus.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)