The Securities and Exchange Commission recently accused a Florida broker-dealer, Park Financial Group Inc., and its principal, Gordon C. Cantley, of violating the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act). The SEC alleges that Park and Cantley aided and abetted a pump and dump fraud scheme perpetrated by Dennis P. Crowley, the former chief executive officer of Spear & Jackson Inc., a Nevada-based tool maker.
Significantly, the SEC also charged Park and Cantley with violating the anti-money laundering provisions of the USA Patriot Act by failing to file Suspicious Activity Reports (SARs). This is the first time that the SEC has brought an enforcement action based on a broker-dealer’s failure to file SARs. The SEC frequently asserts new bases of liability in egregious cases and then exports these bases to more mainstream cases. Broker-dealers, therefore, should expect and prepare for increased scrutiny concerning the filing of SARs.
