In its investigation, FINRA found that:
- From July 2014 through December 2018, Aegis Capital failed to establish a formal supervisory system that was compliant with FIRNA rules. This included Written Supervisory Procedures (WSPs) that would help the firm to comply with FINRA Rule 2111 pertaining to excessive trading.
- From July 2014 to June 2019, Aegis had no formal supervisory system in place and still did not establish, maintain, or enforce a supervisory system, not implement its own WSPs, except for some template (“boilerplate”) WSPs created by a third-party vendor.
- During this period, the firm employed about 350 registered representatives across 20 branch offices. These reps were primarily in the Wall Street, Seventh Avenue and Melville, NY offices. More than 10% of the firm’s registered representatives had disclosures of personal financial issues, such as bankruptcies, outstanding liens, and judgments in their personal FINRA CRD records.
- The firm ignored over 900 exception reports from its clearing house identifying unsuitable trading; a full one-third were regarding senior investors.
- The firm also ignored 50 customer disputes with similar allegations
- Eight representatives were found to have traded excessively in 31 customer accounts. Thirteen of the 50 customer disputes were handled by these eight representatives.
- Two supervisors also ignored the red flags that indicated excessive trading by these representatives, ignoring 700 of the 900 exception reports.
- Although branch managers were instructed to monitor trading and trade blotters for suitability, Aegis Capital’s WSP instructions did not explain how to do this, nor provide training
- Aegis Capital’s blotters were also not designed to flag excessive trading, cost-to-equity or turnover, or any information on using margins, even though representatives frequently recommended margins to the firm’s customers
On November 8, 2021, Aegis Capital agreed to sanctions that included censure, a fine of $1,050,000 (for supervisory violations), restitution of $1,692,256.44 to 68 customers, and a written statement from Aegis Capital’s CEO certifiying the implementation of supervisory systems and WSPs reasonably designed to achieve compliance with all applicable laws, regulations, and rules from both FINRA and NASD that were addressed in the petition. This written certification must be provided to the director of FINRA’s Enforcement Division.
The two supervisors are required to complete 20 hours of supervisory education. Both have been fined and suspended.
Of the involved representatives, two were barred after they were found to have committed churning, excessive trading, and unauthorized trading. Two other representatives were fined and suspended for excessive trading.
Did You Invest With Aegis Capital?
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