Jennifer Davenport, the Attorney General for the State of New Jersey (“NJ AG”), recently announced that Network 1 Financial Securities, Inc., a broker dealer based in New Jersey, agreed to pay a $375,000 civil penalty for violating the New Jersey Uniform Securities Law. The NJ AG reported that the fine was imposed by the New Jersey Bureau of Securities (“the Bureau”) after Bureau investigators found that the company failed, among other things, to establish reasonable and adequate anti-money laundering (“AML”) procedures, to maintain a program that adequately identified customers, and keep required books and records that enabled the company to determine whether it had reasonably performed due diligence on the companies whose shares were offered and sold in private placements. According to the NJ AG, the Bureau determined that Network 1 had failed to reasonable supervise its agents who allowed customers in the People’s Republic of China and Hong Kong to open several hundred accounts without proper proof of customer identification. The agents also allegedly failed to detect and report potentially manipulative trades that may have been intended to artificially increase the stock price of a company whose shares were offered in a private placement.
In the Consent Order, which was signed by Network 1 and the Bureau, Network 1 agreed not to reappoint Michael Molinaro, the firm’s former Chief Compliance Officer and Anti-Money Laundering Compliance Officer, to his former positions at the firm or appoint him to any other supervisory, compliance or securities principal positions. Network 1 also agreed to enhance its AML program by obtaining a third-party consultant to review and provide recommendations regarding the shortcomings identified during the Bureau’s investigation. The company also agreed to provide the Bureau with a report regarding its compliance with applicable Financial Industry Regulatory Authority (“FINRA”) Rules in accordance with a recent settlement reached with FINRA. According to the NJ AG, Network 1 was fined and censured by FINRA in March 2025, and, as part of the settlement, agreed to implement FINRA-related recommendations provided by a third-party consultant.
NJ AG Press Release | Consent Order