The Securities and Exchange Commission’s Division of Examinations released a Risk Alert on Compliance Issues Related to Suspicious Activity Monitoring and Reporting at Broker-Dealers. While it spent most of the publication laying out the vague requirements of reporting suspicious activity, it took a sharp turn and listed six types of activities that the SEC would consider suspicious activity that should be reported.
- Large deposits of low-priced securities, followed by the near-immediate liquidations of those securities and then wiring out the proceeds.
- Patterns of trading activity common to several customers including, but not limited to, the sales of large quantities of low-priced securities of multiple issuers by the customers.
- Trading in thinly traded, low-priced securities that resulted in sudden spikes in price or that represented most, if not all, of the securities’ daily trading volumes.
- Trading in the stock of issuers that were shell companies or had been subject to trading suspensions or whose affiliates, officers, or other insiders had a history of securities law violations.
- Questionable background of customers such as the fact that they were the subject of criminal, civil, or regulatory actions relating to, among other things, securities law violations.
- Trading in the stock of issuers for which over-the-counter stock quotation systems had published warnings because the issuers had ceased to comply with their SEC financial reporting obligations or for which the firms relied on a “freely tradeable” legal opinion that was inconsistent with publicly available information.
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