Aegis Capital in Hot Water with FINRA over Penny Stock Sales

The Financial Industry Regulatory Authority (FINRA) ordered Aegis Capital Corp to pay $950,000 over allegations of improper sales of billions of shares of unregistered penny stocks and anti-money-laundering supervisory lapses. FINRA also fined and suspended two former chief compliance officers at the firm. Robert Eide, the firm’s president and chief executive, was suspended for 15 days and fined $15,000. He was accused of failing to disclose more than $640,000 in outstanding liens. Charles D. Smulevitz and Kevin C. McKenna the firm’s Chief Compliance and AML Compliance Officers, respectively, served 30 and 60 day suspensions, and fines of $5,000 and $10,000.

FINRA alleged that Aegis facilitated a penny stock scheme in August of 2014 that led to $24.5 million in profits for its customers and $1.1 million in commissions for the firm. From April 2009 until June 2011, Aegis liquidated 3.9 billion shares of five unregistered penny stocks that were not exempt from registration requirements. Most securities must be registered with the SEC. Also, some customers of the firm were referred to Aegis by a former broker who had been previously barred from the industry. Later, the broker was charged by the Securities and Exchange Commission (SEC) with abetting securities fraud.