Types Of SEC Cases:  Failure To File SARs

SEC Fines Wall Street Broker-Dealer For Failure To File SARs

The SEC fined a Wall Street broker-dealer for its failure to file SARs (Suspicious Activity Reports) in connection with dubious trading activities by the firm’s clients that should have raised money laundering concerns.

Failure To File SARs Triggers Non-Compliance With AML Regulations

In its Administrative Order, the SEC charged Albert Fried & Company, LLC (“Albert Fried” or the “Company”) with violating the anti-money laundering (“AML”) provisions of the Securities Exchange Act of 1934 and other federal securities laws.  The SEC accused Albert Fried of failure to file SARs with bank regulators between August 2010 and October 2015, even though the Company knew, suspected, or had sufficient reason to suspect illegal activity.  According to the SEC, Albert Fried customers were engaged in high-volume liquidations of low-priced securities, yet the broker-dealer chose to ignore the red flags and disregard its responsibility to file the required reports.

failure to file SARs

The SEC Order

Specifically, the SEC cited the following examples of Albert Fried’s misconduct, including but not limited to:

    • Maintaining customers that were subjects of grand jury subpoenas received by Albert Fried;
    • Multiple instances of the Company’s customers trading more than 80% of a stock’s total market volume in a single day;
    • Customers trading stocks of companies involved in penny stock promotional schemes;
    • Customers trading the securities of companies whose regulatory filings were delinquent; and
    • Unusually large deposits of funds or securities.

First SEC Case Solely For Failure To File SARs

This is the first instance in which the SEC has brought a stand-alone case against a securities firm solely for its failure to file SARs reports under the federal securities laws’ anti-money laundering provisions.

In a press release about the case, the Director of the SEC’s Division of Enforcement explained:

Albert Fried & Company ignored numerous instances when customer trading activity should have triggered the firm to file SARs.  Brokerage firms must take their anti-money laundering responsibilities seriously so they can serve as a line of defense against misconduct and market risks.

failure file SARs

The SEC’s press release

Sanctions and Penalties

Albert Fried & Company consented to the following sanctions and penalties:

    • Cease and desist from committing or causing any violations and any future violations of the AML and SARs regulations
    • Censure
    • $300,000 penalty

Whistleblowers Can Report A Failure To File SARs To The SEC

This case illustrates some types of misconduct that could give rise to SEC whistleblower cases if reported to the Commission through the SEC whistleblower program.

However, the SEC has not made any public statement as to whether this case was itself an actual SEC whistleblower case.  The SEC Office of the Whistleblower posts Notices of Covered Action (“NoCA”) for Commission actions where a final judgment or order results in monetary sanctions exceeding $1 million.  The NoCA list does not disclose if a particular Enforcement action was brought as the result of an SEC whistleblower case, tip, complaint, or referral being filed with the Commission.

Additional Information

For more information about failure to file SARs, click on the links below:

  • The SEC’s Order in SEC v. Albert Fried & Co.  (External link to the SEC’s website.)
  • The SEC’s Press Release about the case.  (External link to the SEC’s website.)
  • Article about the case.  (Note:  External Link to The Pickholz Law Offices website.)