FINRA fined Cantor Fitzgerald & Co. $6 million and ordered nearly $1.3 in disgorgement in commissions and interest for selling billions of unregistered microcap shares, which is a violation of federal securities law. In its decision, FINRA noted that Cantor Fitzgerald failed to detect numerous red flags and other suspicious activity related to the unregistered over-the-counter (OTC) securities, and specifically named the firm's Executive Managing Director of Equity Capital Markets Jarred Kessler and associate Joseph Ludovico as respondents.
The report states that Ludovico, as the broker of record, and Cantor Fitzgerald sold more than 73.6 billion penny stock shares without conducting adequate due diligence, failing to identify red flags that indicated the sales might constitute "illegal, unregistered distributions" not exempt from registration with the SEC.
Investigators also found that the firm's supervisory system, under Kessler, was inadequate and in violation of industry standards, including a deficient anti-money laundering (AML) program. The firm also purportedly failed to adequately train its staff on the risks of OTC securities, including red flags associated with suspicious microcap securities activity.
The findings state that over the course of the 73.6 billion transactions, Cantor Fitzgerald and broker Ludovico failed to identify and/or react appropriately to the red flag of repeated large-volume trading of recently issued and thinly traded microcap securities followed by the securities' immediate liquidation, lack of the securities' filing with the SEC, and bulk sales constituting over 10% of the total outstanding shares of the particular OTC security.
In total, Ludovico and Cantor Fitzgerald's 73.6 billion OTC transactions and liquidations produced $1.285 million in commissions for the firm, accounting for FINRA's order of disgorgement.
If you have invested with broker Joseph Ludovico, firm Cantor Fitzgerald, or with any broker, financial adviser or firm whose excessive sales of unregistered OTC microcap or penny stock shares have proven harmful to your investments or interests please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.