SEC, FINRA fine broker and Chinese bank $7.2 million for suspicious penny stock sales


The Securities and Exchange Commission settled charges on Wednesday against broker-dealers Chardan Capital Markets LLC and Industrial and Commercial Bank of China Financial Services LLC, the U.S. unit of Industrial and Commercial Bank of China Limited, for failing to file Suspicious Activity Reports or SARs for sales of billions of penny stock shares. Without admitting or denying the SEC’s findings, Chardan agreed to pay a $1 million penalty, ICBCFS to pay $860,000, and Chardan’s anti-money laundering officer Jerard Basmagy, who the SEC alleged aided and abetted the violations, will pay $15,000. Basmagy also agreed to industry and penny stock bars for a minimum of three years. FINRA also settled an action against ICBCFS Wednesday where the broker-dealer unit agreed to pay a $5.3 million penalty and to retain an independent compliance consultant. According to the SEC’s complaint, Chardan, an introducing broker, liquidated more than 12.5 billion penny stock shares for seven of its customers from October 2013 to June 2014 and ICBCFS cleared the transactions. Chardan and ICBCFS failed to file any SARs even though the transactions raised red flags, including similar trading patterns and sales in issuers who lacked revenues and products and despite ICBCFS ultimately prohibiting trading in penny stocks by some of the customers.

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