Suspicious Activity Reporting

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.

  1. Large deposits of low-priced securities, followed by the near-immediate liquidations of those securities and then wiring out the proceeds.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

I found this to be a great reference list.

Sources:

Author: Doug Cornelius

You can find out more about Doug on the About Doug page

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