SEC Charges SogoTrade Inc. and Former Anti-Money Laundering Compliance Officer for Failure to File Suspicious Activity Reports (SARs)

ADMINISTRATIVE PROCEEDING
File No. 3-22363, 3-22364

December 17, 2024 - The Securities and Exchange Commission today announced settled charges against SogoTrade, Inc., a registered broker-dealer, for failing to file Suspicious Activity Reports (SARs), and against David Kyi, SogoTrade's former Anti-Money Laundering (AML) Compliance Officer, for willfully aiding and abetting and causing SogoTrade's violations.

To help detect potential securities law and money-laundering violations, broker-dealers like SogoTrade are required to file SARs describing suspicious transactions conducted through their firms. According to the SEC's order, SogoTrade provided an online discount brokerage platform to approximately 24,000 primarily retail customers, of which a significant number engaged in activity that regulatory guidance has identified as potentially suspicious. The SEC's order finds that those activities included depositing and immediately liquidating low-priced and thinly-traded securities and wiring the sales proceeds out of customers' SogoTrade accounts, engaging in coordinated and non-competitive trading, orchestrating cash movements structured to avoid law enforcement or compliance scrutiny, and making security deposits and cash movements significantly in excess of the customers' financial resources based on their customer profiles. The SEC's order further finds that due to alleged deficiencies in SogoTrade's design and implementation of its AML policies and procedures, SogoTrade repeatedly failed to investigate its customers' engagement in suspicious activity and to file SARs when required.

According to the SEC's order, Kyi was primarily responsible for the design and implementation of SogoTrade's AML program, and, until the firm's establishment of a SAR Committee in December 2021, was solely responsible for deciding whether SogoTrade would investigate suspicious activity and whether it would file SARs. The SEC found that on numerous occasions, Kyi failed to investigate suspicious activity and failed to file SARs concerning suspicious activity that SogoTrade systems or personnel, or employees of SogoTrade's clearing firm, brought to his attention. According to the SEC's order, Kyi also had a practice of alerting customers that SogoTrade's surveillance reports had identified their suspicious trading activity and would advise or direct employees to advise customers to keep their trading activities below the average daily volume threshold to avoid triggering firm review.

The SEC's order as to SogoTrade finds that it willfully violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Without admitting or denying the SEC's findings, SogoTrade agreed to be censured by the SEC, to cease and desist from future violations, and to pay a penalty of $125,000. SogoTrade also undertook to hire an independent AML compliance consultant to review SogoTrade's AML compliance program and the implementation and effectiveness of SogoTrade's AML policies and procedures. The SEC's order as to Kyi finds that he willfully aided and abetted and caused SogoTrade's violation of Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Without admitting or denying the SEC's findings, Kyi agreed to cease and desist from future violations, to not act in a compliance capacity, including AML compliance, for five years, and to pay a penalty of $25,000.

The SEC's investigation was conducted by Ibrahim Sajalieu Bah and Corinna Provey Adamson and supervised by Celeste A. Chase and Tejal Shah in the New York Regional Office.

The SEC’s examination that led to the enforcement referral in this matter was conducted by Eleni Stalzer, Ronald Sukhu, and Rosanne Smith, with assistance from Monica Giannelli of the Office of Risk and Strategy, and was supervised by Lourdes Caballes of the New York Regional Office.