RBC Capital Markets Corp., Equity Station Inc., Fagenson & Co. Inc., Olympic Securities LLC, and Alpine Securities Corp. have consented to pay $385,000 to settle Financial Industry Regulatory Authority that they sold collectively over 7.5 billion in “unregistered” penny stock in Universal Express Inc. shares and made about $8.4 million as a result. By settling, the broker-dealers are not agreeing to or denying the securities fraud accusations.
FINRA says that “in each instance” the investment firm’s clients deposited certificates that consisted of huge blocks of thinly traded securities and then liquidated the positions right away. The firms conducted the sales even after a 2004 Securities and Exchange Commission complaint accused Universal Express of illegally issuing over 500 M shares in unregistered stock to be distributed to the public. The SEC claimed the company’s leaders put out bogus press releases and false and misleading statements to promote the sale of the unregistered stock.
According to FINRA:
• RBC Capital Markets reported making $68,000 in commissions from the unregistered stock sale. The broker-dealer has consented to a $135,000 fine.
• Equity Station made $13,575 in commissions. The investment firm is fined $25,000.
• Fagenson & Co. has agreed to a $165,000 fine and made $44,000 in commissions.
• Olympic Securities is fined $20,000 after making $5,200 in commissions.
• Alpine Securities is fined $40,000 for earning $13,575 in commissions.
FINRA says that even with numerous red flags, all five firms did not take the necessary actions to find out whether selling the securities would violate violating federal registration requirements. FINRA contends that when the five broker-dealers conducted the majority of the illegal unregistered stock sales the SEC had either began or won its case against Universal Express, which was eventually sanctioned almost $22 million.
Related Web Resources:
FINRA Fines Five Firms $385,000 for Sale of Unregistered Securities, Other Violations Relating to Penny Stocks, FINRA, April 27, 2010
Regulatory Notice 09-05, FINRA
SEC wins case against Universal Express, CEO, Business Journal, March 2, 2007 Continue reading