DD Support Board and Research Team

[1manband]

Every month, FINRA releases a disciplinary report detailing all the brokerage firms and brokers that were penalized for regulatory violations by FINRA. And every month, there is at least one, sometimes even 2 or 3, brokerage firms that are punished for various violations related to the dumping of penny stocks.

There always seems to be some brokerage, transfer agent or lawyer willing to turn a blind eye to lawbreaking and will happily service penny stock scammers for cash. It is more than the greed element being too strong. It is much more that the punishment is far too light.

In this month's FINRA report, we have Clearview Trading Advisors who was a small institutional brokerage (mostly for international clients, which is a huge red flag in and of itself) that one day in 2018 decided to begin dumping penny stocks for questionable clients while asking no questions. From the FINRA summary, it is easy to see why they made this decision:

"In August 2018, a former Clearview representative introduced a group of institutional customers to Clearview who wished to deposit and sell low-priced equity securities. Clearview opened over 70 institutional delivery-versus-payment/receipt-versus-payment (DVP/RVP) accounts, through which the customers liquidated large volumes of low priced securities. Ettin was the registered representative for these customers and executed
the trades on the over-the-counter market.

During the relevant period, Clearview, through Ettin, executed approximately 7,500 unsolicited transactions consisting of approximately 41 billion shares of low-priced securities for total proceeds of over $94.5 million. Clearview received over $4 million in commissions from this activity, representing almost half of the total revenue Clearview generated during the relevant period"

Clearview, who received $4 million in commissions, gets off with just a censure and a $100,000 fine. The broker (Ettin) was suspended for 9 months, fined $25,000 and has to requalify as a securities principal.

FINRA discovered what was going on in 2019, but it took them almost 4 years to actually do anything about it. And when they did, the punishment is almost meaningless.

No wonder so many brokerage firms are willing assist in penny stock fraud. The chances of getting caught by FINRA are low, and even if you do, the punishment is laughable.

https://www.finra.org/sites/default/files/2023-01/Disciplinary_Actions_January_2023.pdf

https://www.finra.org/sites/default/files/fda_documents/2019064126802%20Clearview%20Trading%20Advisors%2C%20Inc.%20CRD%20142873%20Gregg%20H.%20Ettin%20CRD%201604260%20AWC%20geg%20%282022-1670804406029%29.pdf.