SEC Charges Brokerage Firm with Anti-Money Laundering Violations
Litigation Release No. 25590 / December 13, 2022
Securities and Exchange Commission v. J.H. Darbie & Co., Inc., No. 1:22-cv-10482 (S.D.N.Y. filed Dec. 12, 2022)
On December 12, 2022, the Securities and Exchange Commission charged J.H. Darbie & Co., Inc., a New York City-based brokerage firm, with failing to report suspicious activity related to transactions in tens of billions of shares of low-priced securities - or "penny stocks" - that were traded in over-the-counter markets.
To help detect potential securities law and money-laundering violations, broker-dealers are required to file Suspicious Activity Reports (SARs) describing suspicious transactions taking place through their firms. According to the SEC's complaint, from at least January 2018 to January 2020, J.H. Darbie failed to investigate and file SARs for numerous suspicious transactions, even when the transactions raised red flags recognized in J.H Darbie's written anti-money laundering policies and procedures and in regulatory guidance.
The SEC's complaint, filed in federal district court in Manhattan, charges J.H. Darbie with violations of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder and seeks permanent injunctive relief and civil monetary penalties.
The SEC's investigation was conducted by Christine D. Ely, Suzanne Bettis, and Alison Conn, and was supervised by Thomas P. Smith, Jr. of the New York Regional Office. Victor Suthammanont of the New York Regional Office will lead the litigation with Ms. Bettis. The SEC's examination that led to the investigation was conducted by Michael Altschuler, Stephanie Buonaguro, Linda Lettieri, and Eleni Stalzer of the New York Regional Office.