12 Feb 2016
Cantor Fitzgerald, a U.S. Equity Investment Company, will pay Wall Street’s industry-funded watchdog Financial Industry Regulatory Authority (FINRA) $7.3 million for selling billions of unregistered microcap shares and for inadequacies in its anti-money laundering procedures.
According to FINRA, a portion of Cantor’s thinly traded microcap securities was not registered with the U.S. Securities and Exchange Commission and did not meet requirements for an exemption. If securities being traded are unregistered, it can be a warning sign for the illicit use of funds, including money laundering, terrorist financing and market manipulation.
Cantor, through the former head of its U.S. equity business, Jarred Kessler, expanded its sales in microcap in 2011, but according to FINRA did not develop systems that included a “reasonable and meaningful inquiry” as to the legality of the sales.
FINRA found Cantor’s supervision system lacking in terms of determining whether the microcap shares it had sold for clients were registered with the U.S. Securities and Exchange Commission. Employees were not adequately trained in enquiring whether a sale was exempt from registration requirements, and Cantor’s AML systems were not adapted to scrutinise possible illicit asset transfers in the firm’s microcap business.
$6 million of the payout is a fine, with the remaining $1.3 million to be paid in commissions, plus any interest earned by Cantor from the sale of unregistered microcap shares.
Advance your CPD minutes for reading this article, by signing up and using the CPD WalletFREE CPD Wallet