FINRA Action Unregistered Securities
AEGIS CAPITAL CORP. NAMED IN FINRA ACTION ALLEGING SALE OF UNREGISTERED SECURITIES
SEPTEMBER 22, 2014
In August 2014 the Financial Industry Regulatory Authority (FINRA), Department of Enforcement filed a complaint against Aegis Capital Corp. and two Aegis brokers who served as Chief Compliance Officer: Charles D. Smulevitz and Kevin C. McKenna.
Aegis is a retail and institutional broker-dealer with 20 branch offices and about 430 registered representatives, most of whom work in Melville, New York or New York City, the company’s headquarters.
The FINRA complaint alleges that between April 2009-June 2011, they liquidated 3.9 billion shares of five micro-cap stocks:
• AterNet Systems (ALYI)
• China Crescent Enterprises (CCTR)
• TAO Minerals Ltd. (TAON)
• NewMarket Technology (NWMI)
• Numobile Inc. (NUBL)
that were not registered with the SEC and were not exempt from registration. The sales generated nearly $25 million gross proceeds on which Aegis collected over $1.1 million in commissions.
The complaint alleges that the customers selling the shares were referred to Aegis by a person who had been the subject of three prior regulatory actions involving securities fraud, including a charge for aiding and abetting a scheme to avoid registration of securities. Aegis is charged with violations of the Bank Secrecy Act and anti-money laundering policies.
FINRA alleges that Smulevitz and McKenna, while serving their respective terms as CCO of Aegis ignored “red flags” indicating that the sales could be illicit distributions of unregistered stocks and that Aegis failed to supervise. FINRA seeks sanctions, including disgorgement of ill gotten gains. The complaint was filed by the Boca Raton, FL FINRA Department of Enforcement, Michael A. Gross, Senior Litigation Counsel.
