Spencer Edwards Inc.

Spencer Edwards, Inc. was fined $250,000 and ordered to pay restitution plus interest to customers for failing to establish and implement, as part of its AML compliance program, policies and procedures reasonably designed to detect and cause the reporting of suspicious activity in accepting and liquidating customers’ deposits of microcap securities.

The firm’s customers deposited certificates representing billions of shares of companies with little or no established business, including companies that had recently undergone reverse mergers that dramatically changed their business strategy.

The firm’s customers routinely liquidated those shares within days after depositing them, and then quickly withdrew the proceeds.

Some of those customers had been disciplined by regulatory authorities, had personal or professional ties to the companies whose stock they were liquidating, or otherwise had questionable backgrounds, and virtually all of that activity involved penny stocks.

The firm failed to detect or investigate any of these indicia of suspicious activity.