Published On: September 13, 2017

The Financial Industry Regulatory Authority (FINRA), fined C.L. King & Associates $750,000 for negligently making material misrepresentations and omissions to issuers in connection with the firm’s redemptions of debt securities on behalf of a hedge fund customer. FINRA also found that C.L. King and its AML Compliance Officer, Gregg Alan Miller, failed to establish and implement a reasonable AML program and failed to adequately respond to red flags related to the liquidation of billions of shares of penny stocks indicative of potentially suspicious activity by two customers. Miller was suspended in a principal capacity for six months and fined $20,000.
The manager of the hedge fund at C.L. King allegedly opened joint accounts with terminally ill persons as joint tenants with rights of survivorship. This involved using the accounts to purchase discounted corporate bonds that contained a death put. This allowed the manager of the hedge fund, as the joint account’s survivor, to redeem the investments from issuers through the firm for the full principal amount before maturity upon the death of the joint tenant. FINRA found that C.L. King had an obligation to disclose to issuers during the redemption process that terminally ill joint tenants were not owners of the investment, because the hedge fund required them to sign side agreements in which they gave up their ownership rights to the accounts.
C.L. King also allegedly sold billions of shares in penny stocks on behalf of two customers. FINRA found that the firm and Miller failed to tailor its AML program to the risks presented by its penny stock business and did not monitor the customer’s trading activity for red flags indicative of potential money laundering. Miller and the firm also allegedly failed to conduct adequate due diligence into the trading activities of the Liechtenstein bank. These are all against securities laws.
If you were associated with C.L. King and would like to find out how we may be able to help you bring a claim against the firm on a contingency fee basis, please call our law firm today. Attorneys are standing by and the call is free with no obligation. We sue firms for financial losses in the FINRA arbitration forum.


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