Broker-Dealer Litigation - Greenberg Traurig LLP

The hearing panel found respondents responsible for the supervisory violation and
imposed the following sanctions. ACAP was fined $50,000, required to revise its procedures to
ensure that they are reasonably designed to comply with the requirements of Section 5, including
but not limited to the deficiencies noted by the panel, required to retain an independent
consultant to review and approve the firm’s revised procedures, and suspended from receiving or
selling unregistered penny stocks, until it has implemented its revised procedures after approval
by the independent consultant. Respondent Hume was fined $10,000, suspended from
associating with any FINRA member firm in all principal capacities for one year, and required to
re-qualify before re-associating in a principal capacity.
Department of Enforcement v. AIS Financial, Inc., Disciplinary Proceeding No. 2008012169101,
2011 FINRA Discip. LEXIS 24, (OHO, March 3, 2011).
Respondent was charged with violating Conduct Rules 3011(a) and 2110 by failing to
implement and enforce an anti-money laundering program reasonably designed to achieve and
monitor compliance with applicable laws, rules, and regulations, which resulted in a failure to
identify, investigate, and report suspicious activity. A hearing panel found that respondent
committed the violation and that its conduct was egregious.
The hearing panel noted that the FINRA Sanction Guidelines did not specifically address
violations of Conduct Rule 3011. It noted, however, that the rules requiring firms to implement
AML programs are, in substance, supervisory requirements. As such, the panel considered the
guidelines for supervisory violations in determining the appropriate remedial sanction in this
case. For this violation, the Department Enforcement recommended a $150,000 fine and a oneyear
suspension from all penny stock activity. The hearing panel, however, found that the
conduct warranted a more significant sanction, finding that “[a]nything short of an expulsion of
[the firm] would be insufficient to remedy its misconduct and deter it from engaging in future
misconduct.”
Department of Enforcement v. Hedge Fund Capital Partners LLC, Disciplinary Proceeding No.
2006004122402, 2011 FINRA Discip. LEXIS 20 (OHO, Jan. 26, 2011).
Respondent firm and its Chief Executive Officer were charged with numerous underlying
violations of FINRA and SEC Rules stemming from a “hedge fund hotel” scheme, whereby the
firm rented office space to hedge fund clients at its Fifth Avenue offices, in exchange for soft
dollars, paid through trading commissions. The firm was also charged with failing to supervise
its email and instant message retention, annual compliance meetings and registration of
associated persons.
The hearing panel concluded that respondents’ failure to supervise caused many of the
violations, which could have been prevented with “diligent and reasonable supervision.” While
the firm had written supervisory procedures that addressed areas such as e-mail and instant
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