NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Glendale Securities, Inc.
AWC/2009019747601/20060075263

The Firm failed to adequately implement or enforce its anti-money laundering (AML) compliance program and otherwise comply with its AML obligations, as the firm did not identify and analyze numerous transactions to determine if they were suspicious and were required to be reported to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) on a Suspicious Activity Report-Securities/ Futures Form (Form SAR-SF).

The Firm permitted foreign corporate accounts, all of which were controlled by one individual, to deposit a total of approximately 279 million shares of low-priced securities and/or penny stocks into the accounts, and after the securities were deposited into the accounts, they were promptly sold and all proceeds from the transactions were disbursed by wires to first-party bank accounts maintained with a Scotland bank. The Firm permitted these suspicious activities to occur without conducting adequate AML reviews and failed to file Forms SAR-SF as appropriate.

The Firm had no written procedures

• to detect and prevent participation in an unregistered distribution of securities, and
• addressing the acceptance of securities in either certificate or electronic form and the corresponding sales of those securities.  

In fact, the Firm relied primarily on transfer agents to determine whether the securities were free trading.

Upon receipt of a large block of a low-priced stock (which was, in certain instances, unregistered), the firm’s due diligence was essentially limited to verifying that the security was electronically quoted and contacting the transfer agent to determine the number of outstanding shares and whether the shares were free trading. Notably, the Firm failed to inquire about the length of time the securities had been held; how, when, and under what circumstances the securities had been acquired; the relationship, if any, between the customer and the issuer; and/or how much stock was owned by or under the customer’s control.

Glendale Securities, Inc.: Censured; Fined $45,000

Tags: AML