March 4, 2014

AML Violations Lead to Historic Penalty for Brown Brothers Harriman

Compliance Officer Also Fined and Suspended

As one of the oldest and largest private banks in the United States, Brown Brothers Harriman should have known better. Formed as the result of a merger in 1931 between investment firms Brown Brothers & Co. and Harriman Brothers & Co., this assemblage united over a century of combined financial knowledge and experience. This resulted in creating an institution that has been around longer than many of today’s laws that govern it. With clients in the areas of investment banking, wealth management, commercial banking, investor services and more, it is critical that a company such as BBH maintain a fiduciary responsibly to hold itself to the highest standards of the financial industry.

Yet earlier this month, a FINRA investigation resulted in the assessment of an $8 million fine as a consequence of the poor anti-money laundering (AML) practices maintained by BBH, as well as other related violations. This is not the first time that BBH has been called on the carpet over such issues. In 2007, FINRA and the New York State Banking Department castigated BBH by imparting a formal order for the company to cultivate better internal operations, including the need to meet all AML regulatory requirements. Prior to the $8 million fine handed down to BBH, the highest AML-related fine ever levied was against Banc of America Investment Services in 2007, also for AML compliance offenses. Just as in that case, the BBH AML compliance failure pertains to penny stocks. In addition to this $8 million fine, Harold Crawford, the company’s former Global AML Compliance Officer, was also fined $25,000 and suspended from BBH for a month.

There is an inherent risk involved with penny stocks. Their low buy-in cost makes them an appealing target for those who are willing to commit fraud. In fact, FINRA’s investigation revealed that over the course of a 4½ year-period, BBH was involved in the commission or delivery of securities that involved over 6 billion shares of penny stocks. Some of these stock transactions were made through foreign banks that are considered shelters for banks who strive to maintain level of secrecy about such transactions, with little or no knowledge of the actual customers. Often BBH was unaware of any basic information about the stock’s owner, the relationship between the seller and the issuer, or even how the stock was obtained. This blind-eye approach resulted in at least $850 million in proceeds to the customers of BBH, and a major outcome of the investigation was in highlighting Brown Brothers Harriman’s failure to determine the legality of the stocks.

The current compliance insufficiencies also include BBH’s failure to have an AML program in place that acts in a supervisory capacity, a program which would detect fraudulent or otherwise suspicious activities pertaining to penny stocks, a particularly vulnerable area of investment. BBH also failed to thoroughly investigate penny stock activity, even after a red flag had been raised, nor did they properly file a Suspicious Activity Report. Additionally, Brown Brothers Harriman lacked a method to prevent the distribution of unregistered securities.

BBH stated that the activity for which it has been fined is only one small section of the services that they offer and excludes their investment management and private banking divisions. Neither the company nor Crawford admitted nor denied culpability for results of the investigation, yet both agreed to the entry of FINRA’s decision. However, in response to the findings of the investigation, a spokesperson for the firm stated, “As previously announced to its non-U.S. bank financial intermediary clients, BBH has made changes to its handling of low-priced securities, as well as to its surveillance of this activity, to mitigate a possible recurrence of this matter.”

BBH is entrusted with over $20 billion in assets. It is therefore it is imperative that they have practices in place that provide complete transparency and act in a supervisory capacity that ensures that they not only meet the needs of their clients, but those of regulatory agencies. If you feel that the actions of BBH have negatively impacted your financial interests, please give us a call at 1-877-STOCKLAW.

March 2, 2012

February 2012 FINRA Florida Disciplinary Actions

FINRA (Financial Industry Regulatory Authority) has taken disciplinary actions against the following individuals for violations of FINRA rules and federal securities laws, rules and regulations.


Olaf F. Gamlen (Palm Beach Gardens, Florida)
submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member for 10 business days. Olaf Gamlen consented to the described sanctions and to the entry of findings that he exercised discretion in a customer’s nondiscretionary advisory accounts. The findings stated that although the customer had given Olaf Gamlen oral authorization to use discretion in his accounts to effect securities transactions, Olaf Gamlen did not obtain the customer’s prior written authorization.

Paul Cragg Larsen (Naples, Florida) and Quentin Marius Silic (Naples, Florida) submitted a Letter of Acceptance, Waiver and Consent in which they were each barred from association with any FINRA member in any capacity. Paul Larsen and Quentin Silic consented to the described sanctions and to the entry of findings that they failed to respond to FINRA requests for information and documentation regarding possible undisclosed outside business activities and/or private securities transactions. The findings stated that through counsel, Paul Larsen and Quentin Silic advised FINRA that they would not provide the requested information and documentation.

Jordan Alan Linn (Hallandale, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $2,500 and suspended from association with any FINRA member for 30 days. Jordan Linn consented to the described sanctions and to the entry of findings that he failed to amend his Form U4 to disclose a material fact.

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February 14, 2012

January 2012 FINRA Florida Disciplinary Actions

FINRA (Financial Industry Regulatory Authority) has taken disciplinary actions against the following individuals for violations of FINRA rules and federal securities laws, rules and regulations.

Jan D. Narrine (Winter Garden, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Jan Narrine consented to the described sanction and to the entry of findings that he misappropriated a total of $57,311.99 by transferring funds from customers’ accounts to his own, and in each instance, forged the customers’ signatures on LOAs, which falsely purported to authorize and instruct the transfers. The findings stated that the transfers were made without the customers’ knowledge or authorization.

Victor B. Azevedo (Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $2,500 and suspended from association with any FINRA member for five business days. Victor Azevedo consented to the described sanctions and to the entry of findings that he knowingly made untrue statements while employed by his member firm’s bank affiliate.

Ricardo Blanco (Key Biscayne, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member. Ricardo Blanco consented to the described sanction and to the entry of findings that he sent documents that contained false and inflated account values to a customer and also sent the customer a false account statement, which indicated that the account’s value was approximately $3 million when, in fact, it was worth less than a dollar. The findings stated that Ricardo Blanco sent a false account statement with an inflated value to another customer; the false statement indicated that the value of the account was approximately $2 million when the account had, in fact, been closed.

Richard Paul Counts (Belleair, Florida)
submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member. Counts consented to the described sanction and to the entry of findings that he misappropriated approximately $18,000 from a customer’s checking account and approximately $73,500 from the same customer’s home equity line of credit; Counts converted these funds to his personal use.

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