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.

Kenneth Brown (Principal)
AWC/2007007151703

Acting in his capacity as the AMLCO, Brown  failed to

• implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations;
• detect and investigate suspicious activities and/or other activities in which red flags of money laundering were present and filing a SAR, when appropriate; and
• follow up on red flags indicating that a registered representative was selling unregistered shares of a stock on behalf of the CEO of the issuer, and did not follow up to ascertain what, if any, steps the representative took to inquire about the transactions.

Brown was notified by his member firm’s clearing firm that it was closing the CEO’s account and would allow only liquidating (sell) transactions, but although Brown responded to the clearing firm, he did not adequately follow up to ensure additional purchase transactions did not take place—which did occur. As his firm’s CCO, Brown failed to supervise firm personnel who had been delegated responsibility for reporting, and timely reporting, customer complaints under NASD Rule 3070(c), and to make Forms U4 and U5 amendments with FINRA to report disclosable events.

Kenneth Brown (Principal): Fined $5,000; Suspended Principal capacity only 1 year; Required to complete eight hours of AML training. The fine must be paid either immediately upon Brown’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.

Tags: AML  SAR  Unregistered Securities