Friday, October 10, 2014

Risk Alert for BDs Selling Unregistered Securities for Customers

The SEC has published an important alert for brokerage firm who are selling unregistered securities for their customers.

The Risk Alert summarizes deficiencies that were discovered by OCIE during a sweep of 22 broker-dealers frequently involved in the sale of microcap securities.  The sweep uncovered widespread deficiencies including:

  • Insufficient policies and procedures to monitor for and identify potential red flags in customer-initiated sales.
  • Inadequate controls to evaluate how customers acquired the securities and whether they could be lawfully resold without registration.
  • Failure to file suspicious activity reports, as required by the Bank Secrecy Act, when encountering unusual or suspicious activity in connection with customers’ sales of microcap securities.


“Broker-dealers are key gatekeepers in addressing potential violations of the securities laws by customers,” said Kevin Goodman, National Associate Director of OCIE’s broker-dealer examination program.  “We will continue to assess the controls that firms in this business have in place to monitor for and report any suspicious activities.”

For more information visit | SEC Staff Issue Risk Alert and FAQs on Customer Sales of Securities


The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities regulatory, compliance and litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

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