December 14, 2022

SEC charges NY-based brokerage firm with AML violations related to its handling of penny stocks

On December 12, 2022, the US Securities and Exchange Commission filed charges against NY-based brokerage firm JH Darbie and Co., Inc. for failing to file suspicious activity reports (“SARs”) with the Financial Crimes Enforcement Network (FinCEN), between January 2018 and January 2020, as the Bank Secrecy Act requires.  According to the SEC’s complaint, the charges relate to JH Darbie’s failure to investigate suspicious transactions related to billions of shares of “penny  stocks” traded in the over-the-counter market — transactions that allegedly raised red flags under JH Darbie’s own written AML policies and procedures.  Federal prosecutors contend that SEC investigators identified instances where JH Darbie’s AML protocol required the firm either to investigate potentially reportable activity or document reasons for not investigating, yet the firm failed to do so.  The SEC also alleges that when Suspicious Activity Investigation forms were completed, the firm failed to maintain supporting documentation on numerous occasions.

The complaint, which was filed in the US District Court for the Southern District of New York, charges JH Darbie with violating Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder.  The SEC is seeking civil monetary penalties and a permanent injunction against future securities violations.

SEC Press Release | SEC Order