ADMINISTRATIVE PROCEEDING
File No. 3-21749

September 29, 2023 – The Securities and Exchange Commission today announced settled charges against registered broker-dealer Maxim Group, LLC (“Maxim”) for violating federal securities laws governing the execution of short sales and the submission of suspicious activity reports (SARs). 

To help detect potential securities law and money-laundering violations, broker-dealers are required to file SARs describing suspicious transactions taking place through their firms. According to the SEC’s order, from at least January 2018 through January 2019, Maxim facilitated order flow from other broker-dealers engaged in the sale of large volumes of shares of low-priced over-the-counter microcap securities but did not adequately design or implement its anti-money laundering policies and procedures so as to reasonably address the risks associated with this business. The order further finds that due to these deficiencies, and Maxim’s failure to sufficiently investigate red flags, Maxim failed to file SARs for numerous suspicious transactions. 

Also, according to the order, Maxim routinely facilitated “not held” long sale orders in low-priced securities from its broker-dealer customers by executing a series of principal short sales throughout the day and covering its short positions by purchasing the stock from the broker-dealer customer at a lower price. The order finds that Maxim did not, however, “locate” shares of the stock to borrow prior to effecting its short sales as required by the short-selling provisions of Regulation SHO.

The SEC’s order finds that Maxim willfully violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder, and Rule 203(b)(1) of Regulation SHO under the Exchange Act. Without admitting or denying the SEC’s findings, Maxim consented to a cease-and-desist order and a censure, and agreed to pay a civil money penalty of $800,000.

The SEC’s investigation was conducted by Christine D. Ely, Bari R. Nadworny, Elzbieta Wraga, and Alison R. Levine under the supervision of Sheldon L. Pollock of the New York Regional Office. The SEC examination that led to the investigation was conducted by Steven Vitulano, Edward Janowsky, Hermann Vargas, and Thomas Day. The SEC appreciates the assistance of the Financial Industry Regulatory Authority (FINRA).