(FINRA Case #2013035865303)
Spencer Edwards, Inc. (CRD #22067, Centennial, Colorado) was fined a total of $707,000 and suspended with respect to accepting for deposit or liquidating previously deposited certificated securities until such time as an independent consultant (not unacceptable to FINRA) determines that the firm has adopted and implemented supervisory procedures adequate to reasonably ensure that it is not participating in unregistered offerings of securities.
The sanctions were based on findings that the firm facilitated unregistered and nonexempt customer sales of billions of shares of securities. The findings stated that the firm liquidated approximately 4 billion shares of penny stocks in customer accounts at the firm that were not registered with the SEC, nor were the transactions exempt from registration. The shares sold for the firm’s customers yielded total sales proceeds of approximately $2 million and generated over $107,000 in commissions.
The firm’s failure to carefully scrutinize the transactions is compounded by numerous red flags that suggested the existence of control or an otherwise collusive relationship between its clients and the issuers, or called into question whether the securities acquisition transactions were arms-length.
The findings also stated that the firm failed to adequately supervise its brokers and ensure that it employed procedures adequate to comply with record keeping requirements and its obligation not to participate in unregistered, non-exempt securities offerings. The firm’s CCO, Donna Jean Flemming failed to ensure that it had an effective system in place to retain electronic communications, as the firm’s brokers routinely used personal email accounts bypassing any system of surveillance or monitoring it utilized. The firm knowingly failed to implement procedures tailored to its business. Instead, the firm uncritically executed customer orders without asking appropriate questions regarding the origin of the stock deposited for liquidation. None of those responsible for supervision at the firm conducted sufficient inquiry into any of the transactions at issue, or recognized red flags in the accounts of the customers selling shares. This matter has been appealed to the NAC (National Adjudicatory Council) and the sanctions are not in effect pending review.
If you feel you have been misled or taken advantage by Spencer Edwards, Inc. or any of it’s representatives and wish to discuss legal action, please contact Darren Blum at 1-877-786-2552 (1-877-STOCK LAW), www.stockattorneys.com for a free consultation.