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.

Seaboard Securities, Inc., Anthony Joseph DiGiovanni Sr.(Principal), Sonya Terez Still (Principal) and Anthony Joseph DiGiovanni Jr.
OS/2007008724801

Acting through Anthony DiGiovanni Jr., Seaboard participated in the distribution of unregistered thinly traded securities for firm customers that resulted in proceeds over $3.8 million from the customers and approximately $400,000 in gross commissions for the firm, and failed to perform an adequate inquiry to determine the registration or exemption status of the shares, including failing to make any inquiries to determine the circumstances of how its customers received their shares of unregistered stock, the customers’ relationships with the relevant issuers, or any other relevant facts or circumstances that could have revealed whether the shares were, in fact, exempt from registration. The firm accepted the self-serving statements of its customers and counsel that the shares were exempt and ignored “red flags” indicating the customers and the firm were participating in a scheme to evade registration requirements.

Acting through DiGiovanni Sr., Seaboard failed to adequately supervise DiGiovanni Jr. in his participation in the sales of unregistered securities. DiGiovanni Sr. reviewed the firm’s trade blotters on a daily basis and was aware of the customers’ trading activity and also approved new account documents that raised red flags, but failed to take any action to investigate or prevent the firm’s or DiGiovanni Jr.’s participation in, and illegal sale of, unregistered securities.

Acting through Still, as compliance officer, Seaboard

• failed to establish and maintain adequate policies and procedures, including written supervisory procedures, reasonably designed to achieve compliance with applicable laws, rules and regulations with respect to the sale of unregistered securities.
• failed to develop and implement AML policies and procedures and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act (BSA) and implementing regulations.
• failed to identify or ignored red flags involving numerous instances of potentially suspicious activities, and thus failed to investigate and report these activities in accordance with the firm’s procedures and the requirements of the BSA and implementing regulations.

Moreover, FINRA found that the firm and Still should have detected the suspicious nature of the customers’ liquidation of their penny stocks, investigated the activity and made the appropriate Suspicious Activity Reports (SAR) filings.

Seaboard Securities, Inc.: Fined $125,000, of which $10,000 was jointly and severally with DiGiovanni Sr. and $10,000 was jointly and severally with Still;
Ordered to retain, within 60 days of the date of the Order accepting the Offer of Settlement, an independent consultant to conduct a comprehensive review of the adequacy of the firm’s AML program and its policies, systems and procedures (written and otherwise) and training relating to determining whether securities are freely tradable; the independent consultant is required to submit to FINRA a written report addressing these issues and making recommendations. The firm shall submit to FINRA a written implementation plan, certified by a firm officer, of its implementations of the consultant’s final recommendations. Furthermore, until the firm provides FINRA with the written implementation report, the firm shall be prohibited from selling any securities deposited in certificate form or by Deposit Withdrawal At Custodian (DWAC) unless the stock has been held in an account at the firm for at least one year; and the firm retains an opinion from counsel retained by the firm opining that the stock may be sold in compliance with Section 5 of the Securities Act of 1933.

Anthony Joseph DiGiovanni Sr.: Fined $10,000 jt/sev with Seaboard; Suspend in Principal capacity only 45 days

Sonya Terez Still:  Fined $10,000 jt/sev with Seaboard; Suspend in Principal capacity only 30 days

Anthony Joseph DiGiovanni Jr.: Fined $35,000, which includes the disgorgement of $25,000 in financial benefits received; Suspended 45 days.

Tags: Unregistered Securities  AML  SAR