Aegis Capital Fined $950K for Penny Stock Violations

The Financial Industry Regulatory Authority recently announced that it fined Aegis Capital $950,000 for improperly selling unregistered penny stocks and for related supervisory failures. Aegis CEO and Compliance Officer were also fined and suspended by the regulatory agency.

Aegis Fails to Protect Its Customers Against Risks in Penny Stocks

Aegis enabled trading of nearly 4 billion shares of five penny stocks from 2009 to 2011

According to FINRA, Aegis supported trading by its customers in unregistered penny stocks without implementing the controls and supervisory measures necessary to protect those customers against the significant risk of investment fraud and market manipulation. Compliance officers at Aegis Capital also reportedly failed to act upon numerous red flags indicating illicit distributions of unregistered penny stocks.

Aegis and Unregistered Penny Stocks

Typically, securities must be registered with the Securities and Exchange Commission (SEC) in order to make available to investors crucial information about the security and its issuer. In violation of federal securities laws, Aegis Capital enabled the trading of nearly 4 billion shares of five penny stocks from 2009 to 2011, in spite of the fact that these penny stocks raised numerous red flags. The liquidation of these unregistered securities was not supervised adequately by Aegis, who in one case allowed a single broker barred from the industry to control numerous accounts involving the dubious penny stocks.

In settling the matter, Aegis Capital neither admitted nor denied FINRA’s findings.

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