(BrokerDealer.com)- The Financial Industry Regulatory Authority (FINRA) has given a $7.3mil spanking to broker Cantor Fitzgerald consisting of a $6 million fine and an order to pay $1.3 million for commissions, plus interest, it received from selling billions of unregistered microcap shares in violation of federal law in 2011 and 2012. In addition to its role broking a broad assortment of securities, Cantor is one of the securities industry’s leading ETF brokers.
In addition to the monetary fines, FINRA suspended Jarred Kessler, executive managing director of equity capital markets, for three months in his principal role at the firm and fined him $35,000 for supervisory failures, while equity trader Joseph Ludovico was suspended for two months and fined $25,000. The regulator also sanctioned Cantor for not having adequate supervisory or anti-money laundering programs to detect “red flags” or suspicious activity tied to its microcap activity. The suspension of Kessler from serving in a principal role for Cantor has proven to be an exercise, as the 5-year Cantor employee resigned from the firm last week.
“If a broker-dealer is looking to increase its revenues by expanding a high-risk business line, the firm and its supervisors must tailor their supervision to the risks associated with those businesses. This is especially true when the new business involves the mass liquidation of microcap securities, which presents overwhelming risks of fraud and investor harm,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a statement.
“FINRA has no tolerance for firms and business executives who choose to engage in this business without robust systems designed to ensure that they do not become participants in illegal, unregistered distributions,” Bennett said.
Kessler resigned from the firm last week to pursue “a significant opportunity,” according to his lawyer, Ross Intelisano, of Rich, Intelisano & Katz LLP.In settling this matter, Cantor Fitzgerald neither admitted nor denied the charges, though it did consent to FINRA’s findings.
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