FOG Equities LLC of Chicago, Illinois, Scott Epstein, and David Spack submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry National Regulatory Authority (FINRA) for allegedly failing to establish, implement and maintain an adequate supervisory system and written supervisory procedures for the FOG’s low-priced securities business that were reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933. FINRA investigators found that FOG, Epstein, and Spack failed to establish, maintain and implement anti-money laundering (AML) procedures reasonably designed to detect and report suspicious transactions related to low-priced securities transactions. The Respondents failed to detect and investigate ”red flags” indicative of potentially suspicious account activity in violation of FINRA Rules 3310(a) and 2010. Epstein, who was the designated principal for FOG, was responsible for the daily supervision of the firm and ensuring proper policies and procedures were in place while Spack was responsible for maintaining the firm’s procedures.
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FINRA found that FOG’s procedures were not designed adequately to assess whether securities were registered or appropriately exempt from registration with the Securities Exchange Commission (SEC). FINRA alleged that due to this lack of supervision, penny stock liquidations FOG facilitated occurred without any review for compliance with Section 5. The investigation further revealed that Epstein and Spack relied on their customers to do all due diligence with respect to penny stocks investments. Without admitting or denying the FINRA allegations, the Respondents, in submitting an AWC accepted the sanctions. FOG was ordered to pay a $60,000 fine. Epstein was fined $5,000 and suspended from association with any FINRA member for 30 days. Spack was ordered to pay a $5,000 fine and was suspended from association with any FINRA member in any capacity for 15 days.
Illinois has thousands of stock brokerage firms and investment advisory offices. With so many stock brokerage firms and investment advisor offices, comes the potential for their stockbrokers, financial advisors, and other representatives to engage in all kinds of stockbroker misconduct which violates Federal and Illinois securities laws and Financial Industry Regulatory Authority (FINRA) rules and stock brokerage firms policies and procedures.
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The Law Offices of Robert Wayne Pearce, P.A. are highly experienced lawyers who successfully handle securities law matters and investment disputes in FINRA arbitration proceedings, and who work tirelessly to secure the best possible result for you and your case. For dedicated representation by an attorney with over 40 years of experience and success in all kinds of securities law and investment disputes in FINRA arbitrations serving Illinois citizens, contact the firm by phone at 561-338-0037, toll free at 800-732-2889 or via e-mail.