FINRA Fines & Suspends Former Murphy & Durieu CCO Frede for Compliance Failures, Penny Stock Woes

FINRA suspended former Murphy & Durieu, L.P. Chief Compliance Officer Jonathan Harold Frede of Las Vegas and fined him $20,000 for multiple failures related to substandard supervisory systems at Murphy & Durieu, including deficiencies in anti-money laundering (AML) policies and written supervisory procedures (WSPs).

FINRA AWC #2011030204602

According to the findings, Frede, who joined Murphy & Durieu in 2005 as his 10th broker registration within the industry, failed to establish supervisory systems or develop WSPs designed to comply with the federal Securities Act, even though he was the Chief Compliance Officer of the firm and, as CCO, implementing these systems, policies and procedures, was purportedly his responsibility.

The findings specifically stated that in 2009, Murphy & Durieu suspended certain physical certificate penny stock transactions due to a previous FINRA investigation. Investigators found that instead of stopping the activity entirely, many customers set up a different type of account and continued to trade low-priced securities that way instead, post-2009.

FINRA found that the firm's WSPs and supervisory systems were deficient in regards to the post-2009 trading method, and that the inadequacies continued for several years after the fact.

In regards to the AML violations, FINRA determined that Frede failed to establish policies and procedures to specify how the firm would monitor trade activity and how the firm would review accounts or investigate possible illegal re-sales of restricted securities and other suspected market manipulation or fraud.

FINRA pointed to one specific account whose order to sell 150 million shares of a penny stock—suspicious because the trading volume was well over (3,947% over!) the stock's average daily trading volume of just 3.8 million shares—was a red flag that went unnoticed by Murphy & Durieu.

FINRA believes this and another red flag generating total proceeds in excess of $1 million were missed by Frede, resulting in failure to conduct appropriate due diligence and achieve compliance with securities law.

If you have invested with Jonathan Harold Frede, Murphy & Durieu, or with any other broker or firm whose failure to implement adequate safeguards such as supervisory systems, WSPs or AML provisions has allowed suspicious, manipulative or illegal transactions to slip through the cracks unnoticed, and these transactions have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.

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