Newbridge Securities Corp., a Boca Raton, Fla. based independent broker-dealer with 141 registered reps in 38 branch offices, on Thursday agreed to pay a penalty of $168,000 for its lack of compliance with anti-money laundering programs to oversee new clients linked to a 2019 small-cap IPO of a China-based company, according to a settlement with the Financial Industry Regulatory Authority Inc.
This was a problem for the firm and its customers, according to Finra, with the firm “not knowing” who it was doing business with, a violation of industry rules.
“As a result, the firm permitted numerous customers to open new accounts, despite multiple indicators that the firm did not know the true identity of the customers and without conducting ongoing customer due diligence,” according to the Finra order.
Newbridge Securities accepted Finra’s finding without admitting or denying them, according to the settlement. An attorney for the firm, Gregg Breitbart, declined to comment Friday morning about the matter.
“This feels like groundhog day all over again,” said Andrew Stoltmann, a plaintiff’s attorney. “This action hits on a variety of issues, from the “know your customer” rule, supervision and anti-money laundering related issues. That’s the holy trinity for Finra.”
“This may sound like it’s a bunch of technical issues for a broker-dealer, but these are all extremely important for a firm to get right,” Stoltmann added.
Newbridge Securities has a recent history of falling short on meeting industry standards for supervision of brokers and financial advisors.
In September 2019, Finra fined Newbridge $225,000 among other violations, failing to establish, maintain and enforce a system, including written supervisory procedures, reasonably designed to supervise sales of complex securities, such as structured notes and non-traditional exchange-traded funds.
And in March 2023, Finra fined Newbridge $50,000, and required it to pay restitution of $114,000 to clients for similar supervisory issues, this time related to the sales of alternative mutual funds.
According to Finra, Newbridge in 2019 was engaged to serve as lead underwriter for the anticipated small-cap initial public offering of an unnamed China-based issuer on a U.S. exchange.
Between June 2019 and July 2020, the unnamed company referred more than 20 new customers to Newbridge Securities, including individuals and entities based in China, to participate in the IPO offering. However, the broker-dealer failed to develop and implement an anti-money laundering program reasonably designed to achieve compliance with customer identification program and customer due diligence requirements for those referred customers.
In addition, Newbridge Securities from January 2015 and November 2019 failed to reasonably supervise recommendations to purchase variable rate structured products made to 27 customers, according to Finra.
New chief executive Rich Steinmeier replaced Dan Arnold on October 1.
The global firm is navigating a crisis of confidence as an SEC and DOJ probe into its Western Asset Management business sparked a historic $37B exodus.
Beyond returns, asset managers have to elevate their relationship with digital applications and a multichannel strategy, says JD Power.
New survey finds varied levels of loyalty to advisors by generation.
Busy day for results, key data give markets concerns.
A great man died recently, but this did not make headlines. In fact, it barely even made the news. Maybe it’s because many have already mourned the departure of his greatest legacy: the 60/40 portfolio.
Discover the award-winning strategies behind Destiny Wealth Partners' client-centric approach.
