In re Aegis Capital Corporation

 
 
 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 82956 / March 28, 2018 
ADMINISTRATIVE PROCEEDING 
File No. 3-18412 
 
In the Matter of 
Aegis Capital Corporation, 
Respondent. 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS 
PURSUANT TO SECTIONS 15(b) AND 21C 
OF THE SECURITIES EXCHANGE ACT OF 
1934 AND SECTION 203(e) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER 
 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate that 
public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to 
Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and Section 
203(e) of the Investment Advisers Act of 1940 (“Advisers Act”) against Aegis Capital 
Corporation (“Aegis” or “Respondent”). 
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (“Offer”) that the Commission has determined to accept.  Respondent admits the 
facts set forth in paragraphs 1 to 79 in Section III below, acknowledges that its conduct violated 
the federal securities laws, admits the Commission’s jurisdiction over it and the subject matter of 
these proceedings, and consents to the entry of this order instituting administrative and cease-
and-desist proceedings pursuant to Sections 15(b) and 21C of the Exchange Act and Section 
203(e) of the Advisers Act, Making Findings, and Imposing Remedial Sanctions and a Cease-
and-Desist Order (“Order”), as set forth below.   
 
 
 

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III. 
On the basis of this Order and Respondent’s Offer, the Commission finds
1
 
that: 
SUMMARY 
From at least late 2012 through early 2014, Aegis, a registered broker-dealer, failed to 
file Suspicious Activity Reports (“SARs”) on hundreds of transactions when it knew, suspected, 
or had reason to suspect that the transactions involved the use of the broker-dealer to facilitate 
fraudulent activity or had no business or apparent lawful purpose.  Many of the transactions 
involved red flags of potential market manipulation, including high trading volume in companies 
with little or no business activity during a time of simultaneous promotional activity.  Aegis did 
not file SARs on these transactions even when it specifically identified AML red flags implicated 
by these transactions in its written supervisory procedures.   
Although Aegis had written supervisory procedures concerning AML compliance, the 
firm’s internal trade review mechanisms to identify the AML red flags listed in its written 
supervisory procedures were ineffective.  For example, the trading surveillance system used by 
Aegis was ineffective as it did not analyze low-priced securities transactions in Delivery Versus 
Payment/Receive Versus Payment accounts (“DVP/RVP”).   
Aegis’ failure to file SARs went beyond its inadequate systems to surveil for suspicious 
activity.  Throughout the relevant period, senior Aegis personnel became aware of transactions 
that exhibited numerous AML red flags through alerts from its clearing firm (hereinafter defined 
as “AML Alerts”).  All of these AML Alerts were sent directly to Aegis’ AML Compliance 
Officers (“AML COs”) who were (i) per Aegis’ written supervisory procedures, responsible for 
filing SARs on the firm’s behalf and (ii) the primary point of contact for the clearing firms as it 
related to suspicious activity.   
Although the AML Alerts raised many red flags – including many red flags listed in 
Aegis’ written supervisory procedures as examples of suspicious activities – Aegis did not file 
SARs regarding these transactions.  In fact, Aegis did not create written analyses or compile 
other records indicating that it had considered filing SARs.  Rather, Aegis closed some accounts 
due at least in part to suspicious activity while neglecting to file a SAR for that activity and did 
not investigate why its own surveillance systems failed to detect the suspicious activity. 
                                                 
1
 
 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or 
entity in this or any other proceeding.
 

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As a result of the foregoing, Aegis willfully
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violated Exchange Act Section 17(a) and 
Rule 17a-8 thereunder.   
RESPONDENT 
 Aegis is a dually-registered investment adviser and broker-dealer with multiple branches 
and is headquartered in New York, NY.  For its fiscal year 2014, Aegis had revenues of 
approximately $123 million and, for its fiscal year 2015, revenues of approximately $98 million.  
During those fiscal years, Aegis had revenues of approximately $250,000 and $270,000 from its 
low-priced securities business.  Aegis’ business consists of investment banking, venture capital, 
and debt market services as well as full-service retail and institutional advisory and brokerage 
services.  Aegis’ CEO is also the firm’s founder and 100% owner.   
FACTS 
A. Aegis’ Low Priced Securities Business 
1. During the relevant period, Aegis had various brokerage customers who transacted in 
low-priced securities.  Several of these customers did so through DVP/RVP accounts.  In 
DVP/RVP accounts held at Aegis, the customer deposited their shares at another firm in a 
custodial account, and the sale transactions were effected through Aegis.  During the 
relevant period, Aegis had relationships with various clearing firms that assisted in 
effecting low-priced securities transactions. 
2. Aegis had customers at their branch offices who transacted in low-priced securities.  
Several of these customers were foreign financial institutions that effected transactions on 
behalf of their underlying customers, all of whom were unknown to Aegis. 
B. Aegis’ Anti-Money Laundering Compliance Program 
i. Written Supervisory Procedures Concerning SARs and Specific Red Flags 
Related to Market Manipulations 
3. During the relevant period, Aegis had specific written supervisory procedures concerning 
compliance with its AML responsibilities.  Aegis’ written supervisory procedures 
expressly identified Aegis’ AML CO as the individual responsible for deciding whether 
Aegis needed to file a SAR.  Moreover, Aegis’ written supervisory procedures stated that 
all Aegis employees were obligated to “promptly report to the [AML CO] any known or 
                                                 
2
 
 A willful violation of the securities laws means merely “that the person charged with the duty knows what 
he is doing.” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 
(D.C. Cir. 1949)).  
 

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suspected violations of anti-money laundering policies as well as other suspected 
violations or crimes.” 
4. Pursuant to 31 C.F.R. § 1023.320 (the “SAR Rule”), Aegis was required to file SARs for 
transactions by, at or through the firm that involved or aggregated at least $5,000 if Aegis 
knew, suspected, or had reason to suspect that, among other things, the transactions 
involved funds derived from illegal activity, had no business or apparent lawful purpose, 
or involved using Aegis to facilitate criminal activity.  Aegis explicitly cited the SAR 
Rule in its written supervisory procedures. 
5. Aegis, in its written supervisory procedures, expressly identified certain trading in low-
priced securities as suspicious activity that could warrant a SAR filing:   
Aegis will file [SARs] for transactions that may be indicative of 
money laundering activity.  Suspicious activities include a wide 
range of questionable activities; examples include trading that 
constitutes a substantial portion of all trading for the day in a 
particular security . . . [and] heavy trading in low-priced securities. 
(emphasis added.) 
 
6. Aegis, in its written supervisory procedures, also expressly identified specific AML red 
flags associated with low-priced securities transactions of which its employees should be 
aware.  These specific AML red flags – many of which were also described as red flags 
in industry notices issued by FINRA (e.g., FINRA Notice to Members 09-05 and NASD 
Notice to Members 02-21) – included the following:   
i. There is a sudden spike in investor demand for, coupled with a rising price in, a 
thinly-traded or low-priced security; 
ii. The issuer has been through several recent name changes, business combinations 
or recapitalizations, or the company’s officers are also officers of numerous 
similar companies;  
iii. The issuer’s SEC filings are not current, are incomplete, or nonexistent;  
iv. The customer appears to be acting as an agent for an undisclosed principal, but 
declines or is reluctant, without legitimate commercial reasons, to provide 
information or is otherwise evasive regarding that person or entity; 
v. The customer’s account has wire transfers that have no apparent business purpose 
to or from a country identified as a money laundering risk or a bank secrecy 
haven; and 
vi. The customer, for no apparent reason or in conjunction with other “red flags,” 
engages in transactions involving certain types of securities, such as penny stocks 
. . . which although legitimate, have been used in connection with fraudulent 
schemes and money laundering activity. 

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ii. Aegis’ Trade Review Mechanisms to Identify AML Red Flags Were 
Inadequate and Aegis Did Not Effectively Train its Employees Concerning 
Low-Priced Securities Transactions 
7. While Aegis did have written supervisory procedures concerning AML compliance, 
Aegis’ internal trade review mechanisms to identify the AML red flags listed in its 
written supervisory procedures were ineffective.  Aegis had two such trade review 
mechanisms that were ineffective: (i) daily reviews of transactions by its branch 
managers and (ii) a broader surveillance system provided by its clearing firm.  Moreover, 
Aegis did not adequately train its employees concerning AML issues associated with 
low-priced securities transactions. 
8. Per Aegis’ written supervisory procedures, Aegis’ branch managers were responsible for 
reviewing their branch customers’ trades to identify any suspicious activity.  After 
identifying suspicious activity during their manual trade review, the branch managers 
were required to report it to Aegis’ AML CO so that the AML CO could consider 
whether Aegis should file a SAR.  
9. Although several of Aegis’ customers engaged in suspicious sales of low-priced 
securities, Aegis branch managers did not report suspicious activity to the AML COs. 
10. During the relevant period, Aegis used a trade review system provided by its then 
clearing firm to monitor its customers’ low-priced securities transactions for suspicious 
activity.  This system monitored all of the Firm’s customers’ transactions and 
automatically “flagged” – i.e. turned a row in a trade-blotter display from green to either 
yellow or red – questionable transactions for later review by an Aegis compliance 
employee. 
11. Initially, Aegis used the basic version of the trade review system to monitor its 
transactions, but this system did not analyze DVP/RVP transactions.  Subsequently, in 
July 2013, Aegis upgraded to the enhanced version of the trade review system.   
12. Unlike the basic version, the enhanced version allowed users like Aegis to enable the 
system to analyze DVP/RVP accounts.  Despite the receipt of specific alerts of suspicious 
trading in DVP/RVP accounts described below, however, Aegis did not enable until April 
2015 the enhanced version of the trade review system to analyze DVP/RVP accounts. 
13. Accordingly – during the relevant period – Aegis’ surveillance technology did not 
analyze the transactions described in this order.  Rather, these transactions were assigned 
a green flag and simply batch approved by the applicable Aegis personnel.  
14. Each year, Aegis required all employees to complete a computerized training module that 
included training on AML issues, including SAR filing.  None of these modules, 
however, included any discussion of the red flags associated with low-priced securities 
transactions.  Accordingly, Aegis’ employees – including those employees responsible 
for reviewing trades – never received any training from Aegis that included examples of 

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the red flags associated with low-priced securities transactions that were outlined in the 
firm’s written supervisory procedures. 
C. Aegis Failed to File SARs on Its Customers’ Low-Priced Securities Transactions 
15. Aegis – throughout the relevant period – failed to file SARs on low-priced securities 
transactions and did not create written analyses or compile other records indicating that 
they considered filing SARs.   
16. Aegis failed to file SARs despite the fact that numerous low-priced securities transactions 
effected through the firm exhibited several of the AML red flags that Aegis specifically 
identified in its written supervisory procedures. 
17. In particular, Aegis failed to file SARs on transactions in which Aegis’ customers were 
(i) selling large quantities of low-priced securities that comprised a significant percentage 
of the issuers’ daily trading volume and outstanding float; (ii) trading shares of issuers 
who had changed names and business lines; (iii) selling substantial shares of low-priced 
securities during periods of spikes in price and volume of the issuers’ securities and 
during paid promotional campaigns; and/or (iv) trading in shares of issuers’ that had little 
or no market activity until the promotions began 
18. Aegis’ failure to file SARs on low-priced securities transactions went beyond its 
inadequate systems to surveil for suspicious activity and the red flags specifically 
identified in its written supervisory procedures.  Indeed, as described in greater detail 
below, Aegis failed to file SARs on low-priced securities transactions even when it 
received alerts from its clearing firm about such suspicious transactions. 
i. Aegis’ Clearing Firm Identified AML Red Flags in Aegis’ Low-Priced 
Securities Business and Described Them to Aegis in AML Alerts  
19. In July 2012, Aegis hired a new clearing firm (the “New Clearing Firm”) that it 
transitioned its clearing business to in December 2012.   
20. Beginning in January 2013, the New Clearing Firm identified AML red flags in Aegis’ 
low-priced securities business.   
21. The New Clearing Firm communicated these AML red flags by, among other things, 
sending AML Alerts directly to senior Aegis personnel, including the then-AML COs.  
These AML Alerts identified specific suspicious low-priced securities transactions 
occurring at Aegis. 
22. Despite receiving these AML Alerts, Aegis did not file any SARs concerning the 
identified transactions.  Nor did Aegis create any written analyses or compile other 
records indicating that it considered filing SARs.  Moreover, Aegis did not take any steps 
to determine why its own surveillance systems were failing to detect these suspicious 
transactions.   

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D. Illustrative Examples of Transactions in which Aegis Failed to File SARs 
i. Customer A 
23. Between October 17 and December 27, 2012, an Aegis customer – Customer A – sold 
approximately 2.1 million shares of Issuer A, which traded on OTC Link (previously 
“Pink Sheets”) operated by OTC Markets Group Inc. (“OTC Link”).  Customer A held a 
DVP/RVP account at Aegis and is a private Swiss bank that traded significant volumes of 
low-priced securities through an omnibus arrangement with Aegis on behalf of the Swiss 
bank’s underlying clients who were unknown to Aegis. 
24. At the same time Customer A was selling shares of Issuer A, a stock promotion touting 
the company’s prospects was underway.  Coinciding with the promotional campaign, 
Issuer A’s share price fluctuated from a low of $0.51 to a high of $0.93 on average daily 
volume of 558,792 shares.  In the two months prior to October 17, 2012, no shares of 
Issuer A traded at all.  Thus, Customer A’s trading in Issuer A occurred during a period 
of a sudden spike in price and volume – which were specific AML red flags identified in 
Aegis’ written supervisory procedures. 
25. Prior to Customer A’s trading in Issuer A, Issuer A had undergone several name changes 
– again a specific AML red flag identified in Aegis’ written supervisory procedures.  
Moreover, contrary to the rosy picture of Issuer A painted by the above described 
promotional campaign, Issuer A’s Form 10-Q for the period ending September 30, 2012 
reported that Issuer A had no revenues, a net loss of $143,345, and a “going concern” 
statement from its management.   
26. Despite these red flags associated with the trading by Customer A, Aegis did not file a 
SAR. 
27. From December 2012 to March 2013, Customer A again traded suspiciously in a low-
priced security, this time in Issuer B – another security traded on OTC Link.   
28. Indeed, during that period, Customer A sold 8.2 million shares of Issuer B for proceeds of 
approximately $2.4 million.  The shares it sold accounted for more than 8.8% of Issuer 
B’s outstanding shares.  This trading coincided with a promotional campaign during 
which Issuer B’s share price climbed from a low of approximately $0.40 to a high of 
approximately $0.96, before falling again to approximately $0.07, on average daily 
trading volume of approximately 1.5 million shares.  The only trading in the six months 
prior to the beginning of the promotional campaign occurred on just one day and 
involved only 10,000 shares.   
29. In addition to the suspicious trading noted above, there were other indicia that Issuer B 
likely was the subject of market manipulation.  For example, Issuer B reported in 2013 
that it was a world-class graphite company, yet two years earlier it had been a Malaysian 
publishing company that operated under a different name.  Recent changes in an issuer’s 
name and business was one of the specific AML red flags identified in Aegis’ written 
supervisory procedures. 

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30. On April 4, 2013, the New Clearing Firm sent an AML Alert to Aegis’ then AML CO 
and other Aegis personnel concerning Customer A’s trading in Issuer B.  In the April 4, 
2013 AML Alert, the New Clearing Firm noted that Customer A had received over 9 
million shares of Issuer B into its account between December 12, 2012 and March 4, 
2013, and asked how and when Customer A acquired the shares and whether there was a 
registration statement in effect for them.   
31. Prior to this April 4, 2013 AML Alert, the New Clearing Firm had expressed concerns to 
Aegis about its low-priced securities practices.  In fact, in March 2013, the New Clearing 
Firm implemented specific restrictions on Aegis’ low-priced securities business.  These 
restrictions included a requirement that, before Aegis customers could sell low-priced 
securities that had been physically deposited at the firm, either Aegis’ AML CO, the 
CEO, or the COO had to sign a red flag identifiers form indicating that the signatory had 
reviewed the proposed transactions for red flags commonly associated with market 
manipulation in low-priced securities.  
32. The New Clearing Firm continued to communicate with the then AML CO and other 
Aegis personnel with additional questions concerning Customer A’s trading in Issuer B. 
33. For example, on April 17, 2013, the New Clearing Firm emailed the then AML CO and 
other Aegis personnel citing three websites on which it found evidence of Issuer B 
promotions and made three requests:  (i) describe the due diligence completed before 
executing Customer A’s transactions; (ii) describe how the relationship with Customer A 
was established; and (iii) identify Customer A’s underlying clients. 
34. Despite the AML Alert and questions from the New Clearing Firm, Customer A 
continued to trade low-priced securities at Aegis.  Accordingly, on May 20, 2013, the 
New Clearing Firm wrote yet again to the then AML CO about Customer A:   
As you know AML is really tweaked on this [Customer A] account.  
Because the account is continuing to trade in multiple securities 
which have been subject to regulatory inquiries, we need a concrete 
plan to address this situation as soon as possible.  In absence of 
receiving a mutually agreeable plan, AML going [sic] to be blocking 
transactions in the account beginning Tuesday prior to market 
opening. 
 
35. The CEO requested extensions from the New Clearing Firm so that Customer A could 
continue to trade while Aegis attempted to transition Customer A’s accounts to another 
broker-dealer.  Ultimately, Aegis closed Customer A’s accounts on September 13, 2013, 
at least in part because of concerns regarding the low-priced securities that were traded in 
them. 
36. Despite these red flags associated with the trading by Customer A and Aegis’ closure of 
the account due to the presence of suspicious activity, Aegis did not file a SAR and did 
not create written analyses or compile other records indicating that it even considered 

9 
 
 
filing a SAR.  The fact that Customer A’s account was a DVP/RVP account did not 
relieve Aegis of its SAR filing obligations with respect to that account. 
ii. Customer B 
37. Customer B is a British Virgin Islands company based in China that offers consulting and 
advisory services. 
38. In an approximately one month period beginning in April 2013, Customer B sold 
approximately 200,000 shares of Issuer C through Aegis for proceeds of $2.3 million, or 
over $10 per share.  Issuer C was listed on NASDAQ. 
39. Just six months prior to these sales, Issuer C’s share price was $0.45 per share.  And, a 
month prior to these sales, Issuer C’s share price was approximately $5 per share. 
40. On April 25, 2013, Customer B sent a request to wire approximately $600,000 of the $2.3 
million in proceeds to its bank account in Hong Kong. 
41. Regarding this request, an Aegis compliance employee wrote to the then AML CO, Aegis 
CEO, and COO to explain that the funds included in the transfer request were proceeds 
from Customer B’s trading and wrote “[Issuer C’s] share price has risen quite a bit in the 
past 6 months.  I’d prefer a member of senior management authorize and approve this 
wire.” 
42. After the COO asked whether Issuer C’s shares were restricted when they arrived at 
Aegis, the compliance employee replied to the then AML CO, the Aegis CEO, and COO 
“[c]lean shares but the sudden spike in price is a concern.”   
43. Notwithstanding the red flags the compliance employee raised, Aegis did not file a SAR 
concerning either the suspicious trading or the substantial proceeds wired offshore and 
did not create written analyses or compile other records indicating that it considered 
filing SARs.   
44. After the initial wire was sent to Customer B’s Hong Kong account in late April 2013, 
Customer B made requests to send two more wires totaling the remainder of the proceeds 
from the trading.  Then, On July 1, 2013, the New Clearing Firm sent Aegis an AML 
Alert regarding Customer B’s wire transfers described above.  The New Clearing Firm 
asked Aegis to (i) confirm the identity of the account’s beneficial owner; (ii) describe the 
source of the beneficial owner’s funds; and (iii) describe the purpose of the wires sent to 
Customer B’s Hong Kong bank account. 
45. Notwithstanding the receipt of the AML Alert from the New Clearing Firm and a 
subsequent regulatory request from FINRA that it received in late October 2013 
concerning trading in Issuer C at the firm, Aegis did not file a SAR concerning the 
substantial proceeds wired offshore and did not create written analyses or compile other 
records indicating that it even considered filing a SAR. 

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iii. Customer C 
46. In early November 2013, the New Clearing Firm sent another AML Alert, this time 
involving a different customer, Customer C.  Customer C had a DVP/RVP account at 
Aegis. 
47. On November 1, 2013, the New Clearing Firm sent Aegis an AML Alert outlining 
Customer C’s suspicious trading in several low-priced securities, including Issuers D and 
E and noting that in approximately six months Customer C had sold approximately 1 
billion shares of low-priced securities through Aegis (emphasis added).  Both Issuers D 
and E were traded on OTC Link. 
48. In its AML Alert, the New Clearing Firm noted that Customer C, between September 17 
and October 31, 2013, had sold 31% of Issuer D’s outstanding shares and that the average 
daily trading volume had increased by approximately five fold during Customer C’s 
trading while the share price had dropped by approximately 90%.
 
 
49. Other evidence also indicates Issuer D may have been the subject of market 
manipulation.  In particular, Issuer D had experienced a rapid increase in the company’s 
stock price and volume that coincided with a promotional campaign that was inconsistent 
with the company’s financial performance as reflected in its SEC filings. 
50. With respect to Issuer E, the New Clearing Firm noted in its AML Alert that Issuer E had 
reported no revenues and that Customer C had sold over 60% of the company’s 
outstanding shares in two and a half months while the share price had dropped by 
approximately 50%. 
51. In addition to suspicious trading in Issuers D and E, the New Clearing Firm identified in 
the AML Alert similarly suspicious trading by Customer C in other low-priced securities 
including that Customer C – in one particular low-priced security – had sold more shares 
in three months than the issuer had outstanding. 
52. In the AML Alert, the New Clearing Firm requested a description of:  (i) the due 
diligence performed on the customer; (ii) the due diligence performed on the securities 
Customer C liquidated in the account; and (iii) how Aegis was comfortable with the 
activity in the account.  
53. On November 5, 2013, the then AML CO informed the New Clearing Firm that Aegis 
had reviewed Customer C’s account activity and its account opening paperwork and had 
decided to close the account, which it did, at least in part, because of the AML concerns 
outlined in the AML Alert.   
54. Despite these red flags associated with the trading by Customer C and Aegis’ closing the 
account due to the presence of suspicious activity, Aegis did not file a SAR.  Moreover, 
Aegis did not create written analyses or compile other records indicating that it even 
considered filing a SAR.  The fact that Customer C’s account was a DVP/RVP account 
did not relieve Aegis of its SAR filing obligations with respect to that account. 

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iv. Customer D 
55. Another Aegis customer – Customer D – engaged in suspicious low-priced securities 
transactions for which Aegis did not file a SAR.  Customer D was a foreign financial 
institution with a DVP/RVP account at the firm and traded on behalf of underlying 
customers who were unknown to Aegis. 
56. Over an approximately six-month period beginning in late May 2013, Customer D sold 
approximately 457,000 shares of Issuer F for proceeds of approximately $2.8 million.  
Issuer F traded on OTC Link.  Just prior to the trading – and coinciding with a 
promotional campaign – Issuer F’s share price climbed from $3.90 to $9.39 on 
substantially increased volume. 
57. Customer D was not the only Aegis customer who traded suspiciously in Issuer F.  
Starting approximately two months before Customer D’s trading, Customers A and E 
sold a substantial amount of Issuer F shares for substantial proceeds.  Customer E was yet 
another foreign financial institution with a DVP/RVP account at the firm and traded on 
behalf of underlying customers who were unknown to Aegis; it was incorporated in New 
Zealand and operated from Switzerland. 
58. In particular, Customer A sold approximately 638,000 shares of Issuer F for proceeds of 
approximately $3.7 million while Customer E sold approximately 494,000 shares of 
Issuer F for proceeds of approximately $3.3 million.  Thus, together Customers A and E 
sold over one million shares of Issuer F for proceeds of approximately $7 million. 
59. Despite these red flags associated with the trading by Customer D, Aegis did not file a 
SAR regarding the above trading. 
60. In early June 2013 – just a few weeks after Customer D began its trading in Issuer F – 
Customer D traded in another low-priced security transaction, this time Issuer G.  Issuer 
G also traded on OTC Link. 
61. Between June 11 and 17, 2013 and during a paid promotional campaign for Issuer G, 
Customer D sold approximately 340,000 shares of Issuer G for proceeds of 
approximately $248,000.   
62. Moreover, another Aegis customer, Customer F, traded suspiciously in Issuer G at the 
same time as Customer D did.  In particular, Customer F sold approximately 760,000 
shares of Issuer G through Aegis during the promotion for proceeds of approximately 
$840,000.  Customer F was yet another foreign financial institution with a DVP/RVP 
account at the firm and traded on behalf of underlying customers who were unknown to 
Aegis. 
63. On December 2, 2013, the New Clearing Firm sent an AML Alert to Aegis regarding 
Customer D’s trading in Issuer G, and wrote that the trading “exhibited characteristics 
commonly associated with a pump-and-dump scheme; including paid stock promotion, a 

12 
 
 
significant increase in both price and trading volume, followed by a precipitous drop in 
price and volume.” 
64. In the AML Alert, the New Clearing Firm also noted that Issuer G had changed both its 
name and business line (to a medical device company from an auto parts manufacturer), 
had no revenue and minimal trading volume until the stock promotion began, and that 
Customer D’s trading was similar to the suspicious trading by two other Aegis customers 
that had prompted the New Clearing Firm to request that those accounts be closed earlier 
in the year. 
65. Aegis ultimately closed Customer D’s accounts, at least in part, because of the AML 
concerns associated with it. 
66. Despite these red flags associated with the trading by Customer D and at least one other 
Aegis customer in Issuer G, as well as the closing of Customer D’s account due at least in 
part to concerns regarding low-priced securities transactions, Aegis never filed a SAR.  
Moreover, Aegis did not create any written analyses or compile other documents 
indicating that it considered filing a SAR.  The fact that the above described accounts 
were DVP/RVP accounts did not relieve Aegis of its SAR filing obligations with respect 
to those accounts. 
E. November 18, 2013 DVP/RVP Update to Written Supervisory Procedures 
67. On November 18, 2013 –in response to the deficiencies identified in an examination by 
the SEC’s Office of Compliance Inspections and Examinations – Aegis updated its 
written supervisory procedures to require that low-priced securities transactions in 
DVP/RVP accounts be subjected to the same due diligence as cash accounts when 
customers deposited physical securities.   
68. In particular, Aegis’ updated written supervisory procedures required Aegis’ DVP/RVP 
customers to submit Deposited Securities Request Questionnaires (“DSRQs”) for any 
low-priced securities it wished to trade and required Aegis to complete due diligence to 
identify red flags associated with the issuers of low-priced securities. 
69. DSRQs include, among other things, information about how the customer obtained a 
particular security, whether the customer is an affiliate of the issuer, and how many 
shares of the security the customer owns.  DSRQs had to be filled out by the customer 
and approved by the registered representative and a member of Aegis’ management 
before any trading was to occur.   
F. Customer G 
70. Notwithstanding this update to Aegis’ written supervisory procedures, however, at least 
one of Aegis’ DVP/RVP customers (Customer G) traded suspiciously in low-priced 
securities and did so before the required DSRQ process had been completed.  Customer 
G, a New York corporation, is a microcap hedge fund that held a DVP/RVP account at 
Aegis. 

13 
 
 
71. Between February 10, 2014 and February 20, 2014, Customer G sold 705.9 million 
shares of Issuer H through Aegis for proceeds of approximately $1.24 million.  Issuer H 
traded on OTC Link. 
72. On February 19, 2014, the New Clearing Firm sent an AML Alert to Aegis explaining 
that it was going to block Customer G’s account at market close because, among other 
reasons, Customer G had already sold 200 million shares of Issuer H that day and 2.7 
billion shares of low-priced securities since it opened its account.   
73. In addition to the suspicious trading, there were other indicia that Issuer H may have been 
the subject of market manipulation.  For example, Issuer H experienced a large increase 
in price and volume that coincided with a promotional campaign.  Moreover, the 
company’s name had changed several times before becoming Issuer H.   
74. The AML Alert was not limited to the suspicious Issuer H trades; it also described 
suspicious trading by Customer G in over 1.6 billion shares of the securities of ten 
additional microcap issuers.  
75. The New Clearing Firm subsequently asked for an explanation of:  (i) the due diligence 
Aegis performed on the customer; (ii) the due diligence Aegis performed on the securities 
liquidated in the account; and (iii) how Aegis was comfortable with the activity.    
76. Even after Aegis received the AML Alert concerning Customer G’s trading, Customer G 
continued to trade in Issuer H.  Indeed, on February 19 and 20, 2014, Customer G sold an 
additional 120 million shares of Issuer H. 
77. On February 25, 2014, before Aegis had responded to the New Clearing Firm, it received 
a regulatory request from FINRA regarding trading in Issuer H at the firm.  On March 14, 
2014, Aegis received a second regulatory request from FINRA. 
78. At the time of Customer G’s trading in February 2014, Aegis had already implemented 
its new DSRQ policy for trading in DVP/RVP accounts.  The DSRQ packet for Customer 
G’s trading in Issuer H, however, was not signed by any of the required Aegis personnel 
and, thus, Customer G should never have been allowed to liquidate any of its Issuer H 
shares through Aegis.  
79. Despite the significant trading by Customer G in Issuer H and the other red flags 
associated with the transactions, Aegis never filed a SAR.  Moreover, Aegis did not 
create written analyses or compile other records indicating the consideration of filing a 
SAR.  The fact that Customer G’s account was a DVP/RVP account did not relieve Aegis 
of its SAR filing obligations with respect to that account. 
VIOLATION 
80. The Bank Secrecy Act (“BSA”), and implementing regulations promulgated by the 
Financial Crimes Enforcement Network (“FinCEN”), require that broker-dealers file 
SARs with FinCEN to report a transaction (or a pattern of transactions of which the 
transaction is a part) conducted or attempted by, at, or through the broker-dealer 

14 
 
 
involving or aggregating to at least $5,000 that the broker dealer knows, suspects, or has 
reason to suspect:  (1) involves funds derived from illegal activity or is conducted to 
disguise funds derived from illegal activities; (2) is designed to evade any requirement of 
the BSA; (3) has no business or apparent lawful purpose and the broker-dealer knows of 
no reasonable explanation for the transaction after examining the available facts; or (4) 
involves use of the broker-dealer to facilitate criminal activity. 31 C.F.R. § 
1023.320(a)(2). 
81. Exchange Act Rule 17a-8 requires broker-dealers to comply with the reporting, record-
keeping, and record retention requirements of the BSA.  The failure to file a SAR as 
required by the SAR Rule is a violation of Section 17(a) of the Exchange Act and Rule 
17a-8 thereunder. 
82. By engaging in the conduct described above, Aegis willfully violated Section 17(a) of the 
Exchange Act and Rule 17a-8 thereunder. 
REMEDIAL EFFORTS 
83. In determining to accept the Offer, the Commission considered remedial acts undertaken 
by Respondent.  Aegis retained a third-party AML compliance consultant (“Compliance 
Consultant”) with whom it had never worked before to conduct a review of Aegis’ AML 
program relating to transactions and/or business in low-priced securities and Aegis’ 
handling of DVP/RVP accounts, including Aegis’ relevant policies and procedures, for 
compliance with the Bank Secrecy Act.  For the purpose of this review, “low-priced 
security” and “low-priced securities” meant any equity security that trades at or below $5 
per share. 
84. The Compliance Consultant submitted to the Commission’s staff a written report (the 
“Report”) describing the review it performed, the names of the individuals who 
performed the review, the conclusions reached, and the Compliance Consultant’s 
recommendations for changes in or improvements to Aegis’ policies and procedures. 
UNDERTAKINGS 
Aegis has undertaken to: 
85. Compliance Consultant.  With respect to its retention of the Compliance Consultant, 
Aegis has agreed to the following undertakings: 
a. Aegis will continue to retain the services of the Compliance Consultant to 
complete the tasks, as outlined in these undertakings, associated with the review 
and Report described in paragraphs 83-84.  The Compliance Consultant’s 
compensation and expenses shall be borne exclusively by Aegis.   
b. Aegis shall adopt all recommendations contained in the Report within sixty (60) 
days the issuance of this Order; provided, however, that within thirty (30) days 
after the date of the Order’s issuance, Aegis shall in writing advise the 
Compliance Consultant and the Commission staff of any recommendations that 

15 
 
 
Aegis considers to be unduly burdensome, impractical, or inappropriate.  With 
respect to any recommendation that Aegis considers unduly burdensome, 
impractical, or inappropriate, Aegis need not adopt that recommendation at that 
time but shall propose in writing an alternative policy, procedure, or system 
designed to achieve the same objective or purpose.  
c. As to any recommendation with respect to Aegis’ policies and procedures on 
which Aegis and the Compliance Consultant do not agree, Aegis and the 
Compliance Consultant shall attempt in good faith to reach an agreement within 
sixty (60) days after the date this Order is issued.  Within fifteen (15) days after 
the conclusion of the discussion and evaluation by Aegis and the Compliance 
Consultant, Aegis shall require that the Compliance Consultant inform Aegis and 
the Commission staff in writing of the Compliance Consultant’s final 
determination concerning any recommendation that Aegis considers to be unduly 
burdensome, impractical, or inappropriate.  Aegis shall abide by the 
determinations of the Compliance Consultant and, within thirty (30) days after 
final agreement between Aegis and the Compliance Consultant or final 
determination of the Compliance Consultant, whichever occurs first, Aegis shall 
adopt and implement all of the recommendations that the Compliance Consultant 
deems appropriate. 
d. Within thirty (30) days of Aegis’ adoption of all of the recommendations in the 
Report that the Compliance Consultant deems appropriate, as determined pursuant 
to the procedures set forth herein, Aegis shall certify in writing to the Compliance 
Consultant and the Commission staff that Aegis has adopted and implemented all 
of the Compliance Consultant’s recommendations in the Report.  Thereafter, 
beginning one hundred eighty days (180) after the entry of this Order, the 
Compliance Consultant shall conduct such review as it deems appropriate to 
verify that Aegis has appropriately implemented the recommendations in the 
Report.  Prior to two hundred and ten (210) days after the entry of this Order, the 
Compliance Consultant shall confirm to the Commission staff that Aegis has 
adopted and implemented all of the Compliance Consultant’s recommendations in 
the Report.  Unless otherwise directed by the Commission staff, all Reports, 
certifications, and other documents required to be provided to the Commission 
staff shall be sent to Antonia Chion, Associate Director, Division of Enforcement, 
Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 
20549, or such other address as the Commission staff may provide. 
e. On the anniversary of the date of the submission of the Report described in 
paragraph 84, the Compliance Consultant shall conduct a review to determine 
whether: (1) Aegis is implementing all of the Compliance Consultant’s 
recommendations adopted pursuant to the foregoing provisions and this provision; 
and, (2) there have been any changes in the law or Aegis’ business operations 
such that the recommendations should be amended and updated to take into 
account any such changed circumstance.  Within forty-five (45) days after the 
anniversary date of the submission of the Report, the Compliance Consultant shall 
submit a written and dated report of its findings to Aegis and the Commission 

16 
 
 
staff (the “Anniversary Report”).  Aegis shall require that the Anniversary Report 
include a description of the review performed, the names of the individuals who 
performed the review, the conclusions reached, and any further recommendations 
concerning changes in or improvements to Aegis’ policies and procedures 
directed at effecting implementation of the recommendations in the initial Report 
or the Anniversary Report or directed at addressing any changes in the law or 
business.  Any recommendations made in the Anniversary Report shall be subject 
to the same processes set forth in subparagraphs 85(b) through (d).  
f. Aegis shall cooperate fully with the Compliance Consultant and shall provide the 
Compliance Consultant with access to such of its files, books, records, and 
personnel as are reasonably requested by the Compliance Consultant for review. 
g. To ensure the independence of the Compliance Consultant for the remainder of 
the engagement, Aegis:  (1) shall not have the authority to terminate the 
Compliance Consultant or substitute another compliance consultant for the 
Compliance Consultant without the prior written approval of the Commission 
staff; and (2) shall compensate the Compliance Consultant and persons engaged 
to assist the Compliance Consultant for services rendered pursuant to this Order at 
their reasonable and customary rates. 
h. Aegis shall maintain its agreement with the Compliance Consultant, which 
provides that for the period of engagement and for a period of two (2) years from 
completion of the engagement, the Compliance Consultant shall not enter into any 
employment, consultant, attorney-client, auditing or other professional 
relationship with Aegis, or any of its present or former affiliates, directors, 
officers, employees, or agents acting in their capacity as such.  Aegis shall 
similarly maintain its agreement with the Compliance Consultant requiring that 
any firm with which the Compliance Consultant is affiliated or of which the 
Compliance Consultant is a member, and any person engaged to assist the 
Compliance Consultant in the performance of the Compliance Consultant’s duties 
under this Order shall not, without prior written consent of the Commission staff, 
enter into any employment, consultant, attorney-client, auditing or other 
professional relationship with Aegis, or any of its present or former affiliates, 
directors, officers, employees, or agents acting in their capacity as such for the 
period of the engagement and for a period of two (2) years after the engagements. 
i. Recordkeeping.  Aegis shall preserve for a period of not less than six years from 
the end of the fiscal year last used, the first two years in an easily accessible place, 
any record of its compliance with the undertakings set forth herein.  
86. Deadlines.  For good cause shown, the Commission staff may extend any of the 
procedural dates relating to the undertakings.  Deadlines for procedural dates shall be 
counted in calendar days, except that if the last day falls on a weekend or federal holiday, 
the next business day shall be considered to be the last day.  

17 
 
 
87. Certifications of Compliance by Respondents.  Aegis shall certify, in writing, compliance 
with its undertakings set forth above.  The certification shall identify the undertakings, 
provide written evidence of compliance in the form of a narrative, and be supported by 
exhibits sufficient to demonstrate compliance.  The Commission staff may make 
reasonable requests for further evidence of compliance, and Aegis agrees to provide such 
evidence.  The certification and supporting material shall be submitted to Antonia Chion, 
Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 
F Street, N.E., Washington, D.C. 20549, or such other address as the staff of the 
Commission may provide, with a copy to the Office of Chief Counsel of the Enforcement 
Division, no later than sixty (60) days from the date of the completion of the 
undertakings. 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent Aegis’ Offer.  
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) 
of the Advisers Act it is hereby ORDERED that Aegis: 
 
A. cease and desist from committing or causing any violations and any future violations of 
Section 17(a) of the Exchange Act and Rule 17a-8 thereunder; 
 
B. is censured; 
 
C. shall pay a civil monetary penalty in the amount of $750,000 to the Securities and 
Exchange Commission for transfer to the general fund of the United States Treasury, 
subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional 
interest shall accrue pursuant to 31 U.S.C. §3717.  Payment shall be made in the 
following installments:  $75,000 within ten (10) days after the institution of this Order, 
with the remaining civil penalties, and interest accrued pursuant to 31 U.S.C. § 3717, due 
in nine (9) monthly installments of $75,000 beginning on the first day of the month 
following the institution of this Order and continuing on the first day of each month 
thereafter for eight (8) months.   
 
If any payment is not made by the date the payment is required by this Order, the entire 
outstanding balance of the civil penalties, plus any additional interest accrued pursuant to 
31 U.S.C. 3717, shall be due and payable immediately, without further application.    
 
Payment must be made in one of the following ways: 
 
1. Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request; 
2. Respondent may make direct payment from a bank account via Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

18 
 
 
3. Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to: 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Aegis as Respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Antonia Chion, 
Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 
F Street NE, Washington, DC 20549. 
 
Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  
To preserve the deterrent effect of the civil penalty, Respondent agrees that in any 
Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, 
offset or reduction of any award of compensatory damages by the amount of any part of 
Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 
any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, 
within 30 days after entry of a final order granting the Penalty Offset, notify the 
Commission’s counsel in this action and pay the amount of the Penalty Offset to the 
Securities and Exchange Commission.  Such a payment shall not be deemed an additional 
civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 
private damages action brought against Respondent by or on behalf of one or more 
investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
D. shall comply with the undertakings enumerated in Section III above. 
 
By the Commission. 
   
  Brent J. Fields 
Secretary 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES EXCHANGE ACT OF 1934 
Release No. 82956 / March 28, 2018 

ADMINISTRATIVE PROCEEDING 
File No. 3-18412 

 

In the Matter of 

Aegis Capital Corporation, 

Respondent. 

 ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

1934 AND SECTION 203(e) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER 

 

I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate that 

public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to 

Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and Section 

203(e) of the Investment Advisers Act of 1940 (“Advisers Act”) against Aegis Capital 

Corporation (“Aegis” or “Respondent”). 

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (“Offer”) that the Commission has determined to accept.  Respondent admits the 

facts set forth in paragraphs 1 to 79 in Section III below, acknowledges that its conduct violated 

the federal securities laws, admits the Commission’s jurisdiction over it and the subject matter of 

these proceedings, and consents to the entry of this order instituting administrative and cease-

and-desist proceedings pursuant to Sections 15(b) and 21C of the Exchange Act and Section 

203(e) of the Advisers Act, Making Findings, and Imposing Remedial Sanctions and a Cease-

and-Desist Order (“Order”), as set forth below.   

 

 

 



2 
 

 

III. 

On the basis of this Order and Respondent’s Offer, the Commission finds
1 

that: 

SUMMARY 

From at least late 2012 through early 2014, Aegis, a registered broker-dealer, failed to 

file Suspicious Activity Reports (“SARs”) on hundreds of transactions when it knew, suspected, 

or had reason to suspect that the transactions involved the use of the broker-dealer to facilitate 

fraudulent activity or had no business or apparent lawful purpose.  Many of the transactions 

involved red flags of potential market manipulation, including high trading volume in companies 

with little or no business activity during a time of simultaneous promotional activity.  Aegis did 

not file SARs on these transactions even when it specifically identified AML red flags implicated 

by these transactions in its written supervisory procedures.   

Although Aegis had written supervisory procedures concerning AML compliance, the 

firm’s internal trade review mechanisms to identify the AML red flags listed in its written 

supervisory procedures were ineffective.  For example, the trading surveillance system used by 

Aegis was ineffective as it did not analyze low-priced securities transactions in Delivery Versus 

Payment/Receive Versus Payment accounts (“DVP/RVP”).   

Aegis’ failure to file SARs went beyond its inadequate systems to surveil for suspicious 

activity.  Throughout the relevant period, senior Aegis personnel became aware of transactions 

that exhibited numerous AML red flags through alerts from its clearing firm (hereinafter defined 

as “AML Alerts”).  All of these AML Alerts were sent directly to Aegis’ AML Compliance 

Officers (“AML COs”) who were (i) per Aegis’ written supervisory procedures, responsible for 

filing SARs on the firm’s behalf and (ii) the primary point of contact for the clearing firms as it 

related to suspicious activity.   

Although the AML Alerts raised many red flags – including many red flags listed in 

Aegis’ written supervisory procedures as examples of suspicious activities – Aegis did not file 

SARs regarding these transactions.  In fact, Aegis did not create written analyses or compile 

other records indicating that it had considered filing SARs.  Rather, Aegis closed some accounts 

due at least in part to suspicious activity while neglecting to file a SAR for that activity and did 

not investigate why its own surveillance systems failed to detect the suspicious activity. 

                                                 

1
 
 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or 

entity in this or any other proceeding.
 



3 
 

 

As a result of the foregoing, Aegis willfully
2 

violated Exchange Act Section 17(a) and 

Rule 17a-8 thereunder.   

RESPONDENT 

 Aegis is a dually-registered investment adviser and broker-dealer with multiple branches 

and is headquartered in New York, NY.  For its fiscal year 2014, Aegis had revenues of 

approximately $123 million and, for its fiscal year 2015, revenues of approximately $98 million.  

During those fiscal years, Aegis had revenues of approximately $250,000 and $270,000 from its 

low-priced securities business.  Aegis’ business consists of investment banking, venture capital, 

and debt market services as well as full-service retail and institutional advisory and brokerage 

services.  Aegis’ CEO is also the firm’s founder and 100% owner.   

FACTS 

A. Aegis’ Low Priced Securities Business 

1. During the relevant period, Aegis had various brokerage customers who transacted in 

low-priced securities.  Several of these customers did so through DVP/RVP accounts.  In 

DVP/RVP accounts held at Aegis, the customer deposited their shares at another firm in a 

custodial account, and the sale transactions were effected through Aegis.  During the 

relevant period, Aegis had relationships with various clearing firms that assisted in 

effecting low-priced securities transactions. 

2. Aegis had customers at their branch offices who transacted in low-priced securities.  

Several of these customers were foreign financial institutions that effected transactions on 

behalf of their underlying customers, all of whom were unknown to Aegis. 

B. Aegis’ Anti-Money Laundering Compliance Program 

i. Written Supervisory Procedures Concerning SARs and Specific Red Flags 

Related to Market Manipulations 

3. During the relevant period, Aegis had specific written supervisory procedures concerning 

compliance with its AML responsibilities.  Aegis’ written supervisory procedures 

expressly identified Aegis’ AML CO as the individual responsible for deciding whether 

Aegis needed to file a SAR.  Moreover, Aegis’ written supervisory procedures stated that 

all Aegis employees were obligated to “promptly report to the [AML CO] any known or 

                                                 

2
 
 A willful violation of the securities laws means merely “that the person charged with the duty knows what 

he is doing.” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 

(D.C. Cir. 1949)).  

 



4 
 

 

suspected violations of anti-money laundering policies as well as other suspected 

violations or crimes.” 

4. Pursuant to 31 C.F.R. § 1023.320 (the “SAR Rule”), Aegis was required to file SARs for 

transactions by, at or through the firm that involved or aggregated at least $5,000 if Aegis 

knew, suspected, or had reason to suspect that, among other things, the transactions 

involved funds derived from illegal activity, had no business or apparent lawful purpose, 

or involved using Aegis to facilitate criminal activity.  Aegis explicitly cited the SAR 

Rule in its written supervisory procedures. 

5. Aegis, in its written supervisory procedures, expressly identified certain trading in low-

priced securities as suspicious activity that could warrant a SAR filing:   

Aegis will file [SARs] for transactions that may be indicative of 

money laundering activity.  Suspicious activities include a wide 

range of questionable activities; examples include trading that 

constitutes a substantial portion of all trading for the day in a 

particular security . . . [and] heavy trading in low-priced securities. 

(emphasis added.) 

 

6. Aegis, in its written supervisory procedures, also expressly identified specific AML red 

flags associated with low-priced securities transactions of which its employees should be 

aware.  These specific AML red flags – many of which were also described as red flags 

in industry notices issued by FINRA (e.g., FINRA Notice to Members 09-05 and NASD 

Notice to Members 02-21) – included the following:   

i. There is a sudden spike in investor demand for, coupled with a rising price in, a 

thinly-traded or low-priced security; 

ii. The issuer has been through several recent name changes, business combinations 

or recapitalizations, or the company’s officers are also officers of numerous 

similar companies;  

iii. The issuer’s SEC filings are not current, are incomplete, or nonexistent;  

iv. The customer appears to be acting as an agent for an undisclosed principal, but 

declines or is reluctant, without legitimate commercial reasons, to provide 

information or is otherwise evasive regarding that person or entity; 

v. The customer’s account has wire transfers that have no apparent business purpose 

to or from a country identified as a money laundering risk or a bank secrecy 

haven; and 

vi. The customer, for no apparent reason or in conjunction with other “red flags,” 

engages in transactions involving certain types of securities, such as penny stocks 

. . . which although legitimate, have been used in connection with fraudulent 

schemes and money laundering activity. 



5 
 

 

ii. Aegis’ Trade Review Mechanisms to Identify AML Red Flags Were 

Inadequate and Aegis Did Not Effectively Train its Employees Concerning 

Low-Priced Securities Transactions 

7. While Aegis did have written supervisory procedures concerning AML compliance, 

Aegis’ internal trade review mechanisms to identify the AML red flags listed in its 

written supervisory procedures were ineffective.  Aegis had two such trade review 

mechanisms that were ineffective: (i) daily reviews of transactions by its branch 

managers and (ii) a broader surveillance system provided by its clearing firm.  Moreover, 

Aegis did not adequately train its employees concerning AML issues associated with 

low-priced securities transactions. 

8. Per Aegis’ written supervisory procedures, Aegis’ branch managers were responsible for 

reviewing their branch customers’ trades to identify any suspicious activity.  After 

identifying suspicious activity during their manual trade review, the branch managers 

were required to report it to Aegis’ AML CO so that the AML CO could consider 

whether Aegis should file a SAR.  

9. Although several of Aegis’ customers engaged in suspicious sales of low-priced 

securities, Aegis branch managers did not report suspicious activity to the AML COs. 

10. During the relevant period, Aegis used a trade review system provided by its then 

clearing firm to monitor its customers’ low-priced securities transactions for suspicious 

activity.  This system monitored all of the Firm’s customers’ transactions and 

automatically “flagged” – i.e. turned a row in a trade-blotter display from green to either 

yellow or red – questionable transactions for later review by an Aegis compliance 

employee. 

11. Initially, Aegis used the basic version of the trade review system to monitor its 

transactions, but this system did not analyze DVP/RVP transactions.  Subsequently, in 

July 2013, Aegis upgraded to the enhanced version of the trade review system.   

12. Unlike the basic version, the enhanced version allowed users like Aegis to enable the 

system to analyze DVP/RVP accounts.  Despite the receipt of specific alerts of suspicious 

trading in DVP/RVP accounts described below, however, Aegis did not enable until April 

2015 the enhanced version of the trade review system to analyze DVP/RVP accounts. 

13. Accordingly – during the relevant period – Aegis’ surveillance technology did not 

analyze the transactions described in this order.  Rather, these transactions were assigned 

a green flag and simply batch approved by the applicable Aegis personnel.  

14. Each year, Aegis required all employees to complete a computerized training module that 

included training on AML issues, including SAR filing.  None of these modules, 

however, included any discussion of the red flags associated with low-priced securities 

transactions.  Accordingly, Aegis’ employees – including those employees responsible 

for reviewing trades – never received any training from Aegis that included examples of 



6 
 

 

the red flags associated with low-priced securities transactions that were outlined in the 

firm’s written supervisory procedures. 

C. Aegis Failed to File SARs on Its Customers’ Low-Priced Securities Transactions 

15. Aegis – throughout the relevant period – failed to file SARs on low-priced securities 

transactions and did not create written analyses or compile other records indicating that 

they considered filing SARs.   

16. Aegis failed to file SARs despite the fact that numerous low-priced securities transactions 

effected through the firm exhibited several of the AML red flags that Aegis specifically 

identified in its written supervisory procedures. 

17. In particular, Aegis failed to file SARs on transactions in which Aegis’ customers were 

(i) selling large quantities of low-priced securities that comprised a significant percentage 

of the issuers’ daily trading volume and outstanding float; (ii) trading shares of issuers 

who had changed names and business lines; (iii) selling substantial shares of low-priced 

securities during periods of spikes in price and volume of the issuers’ securities and 

during paid promotional campaigns; and/or (iv) trading in shares of issuers’ that had little 

or no market activity until the promotions began 

18. Aegis’ failure to file SARs on low-priced securities transactions went beyond its 

inadequate systems to surveil for suspicious activity and the red flags specifically 

identified in its written supervisory procedures.  Indeed, as described in greater detail 

below, Aegis failed to file SARs on low-priced securities transactions even when it 

received alerts from its clearing firm about such suspicious transactions. 

i. Aegis’ Clearing Firm Identified AML Red Flags in Aegis’ Low-Priced 

Securities Business and Described Them to Aegis in AML Alerts  

19. In July 2012, Aegis hired a new clearing firm (the “New Clearing Firm”) that it 

transitioned its clearing business to in December 2012.   

20. Beginning in January 2013, the New Clearing Firm identified AML red flags in Aegis’ 

low-priced securities business.   

21. The New Clearing Firm communicated these AML red flags by, among other things, 

sending AML Alerts directly to senior Aegis personnel, including the then-AML COs.  

These AML Alerts identified specific suspicious low-priced securities transactions 

occurring at Aegis. 

22. Despite receiving these AML Alerts, Aegis did not file any SARs concerning the 

identified transactions.  Nor did Aegis create any written analyses or compile other 

records indicating that it considered filing SARs.  Moreover, Aegis did not take any steps 

to determine why its own surveillance systems were failing to detect these suspicious 

transactions.   



7 
 

 

D. Illustrative Examples of Transactions in which Aegis Failed to File SARs 

i. Customer A 

23. Between October 17 and December 27, 2012, an Aegis customer – Customer A – sold 

approximately 2.1 million shares of Issuer A, which traded on OTC Link (previously 

“Pink Sheets”) operated by OTC Markets Group Inc. (“OTC Link”).  Customer A held a 

DVP/RVP account at Aegis and is a private Swiss bank that traded significant volumes of 

low-priced securities through an omnibus arrangement with Aegis on behalf of the Swiss 

bank’s underlying clients who were unknown to Aegis. 

24. At the same time Customer A was selling shares of Issuer A, a stock promotion touting 

the company’s prospects was underway.  Coinciding with the promotional campaign, 

Issuer A’s share price fluctuated from a low of $0.51 to a high of $0.93 on average daily 

volume of 558,792 shares.  In the two months prior to October 17, 2012, no shares of 

Issuer A traded at all.  Thus, Customer A’s trading in Issuer A occurred during a period 

of a sudden spike in price and volume – which were specific AML red flags identified in 

Aegis’ written supervisory procedures. 

25. Prior to Customer A’s trading in Issuer A, Issuer A had undergone several name changes 

– again a specific AML red flag identified in Aegis’ written supervisory procedures.  

Moreover, contrary to the rosy picture of Issuer A painted by the above described 

promotional campaign, Issuer A’s Form 10-Q for the period ending September 30, 2012 

reported that Issuer A had no revenues, a net loss of $143,345, and a “going concern” 

statement from its management.   

26. Despite these red flags associated with the trading by Customer A, Aegis did not file a 

SAR. 

27. From December 2012 to March 2013, Customer A again traded suspiciously in a low-

priced security, this time in Issuer B – another security traded on OTC Link.   

28. Indeed, during that period, Customer A sold 8.2 million shares of Issuer B for proceeds of 

approximately $2.4 million.  The shares it sold accounted for more than 8.8% of Issuer 

B’s outstanding shares.  This trading coincided with a promotional campaign during 

which Issuer B’s share price climbed from a low of approximately $0.40 to a high of 

approximately $0.96, before falling again to approximately $0.07, on average daily 

trading volume of approximately 1.5 million shares.  The only trading in the six months 

prior to the beginning of the promotional campaign occurred on just one day and 

involved only 10,000 shares.   

29. In addition to the suspicious trading noted above, there were other indicia that Issuer B 

likely was the subject of market manipulation.  For example, Issuer B reported in 2013 

that it was a world-class graphite company, yet two years earlier it had been a Malaysian 

publishing company that operated under a different name.  Recent changes in an issuer’s 

name and business was one of the specific AML red flags identified in Aegis’ written 

supervisory procedures. 



8 
 

 

30. On April 4, 2013, the New Clearing Firm sent an AML Alert to Aegis’ then AML CO 

and other Aegis personnel concerning Customer A’s trading in Issuer B.  In the April 4, 

2013 AML Alert, the New Clearing Firm noted that Customer A had received over 9 

million shares of Issuer B into its account between December 12, 2012 and March 4, 

2013, and asked how and when Customer A acquired the shares and whether there was a 

registration statement in effect for them.   

31. Prior to this April 4, 2013 AML Alert, the New Clearing Firm had expressed concerns to 

Aegis about its low-priced securities practices.  In fact, in March 2013, the New Clearing 

Firm implemented specific restrictions on Aegis’ low-priced securities business.  These 

restrictions included a requirement that, before Aegis customers could sell low-priced 

securities that had been physically deposited at the firm, either Aegis’ AML CO, the 

CEO, or the COO had to sign a red flag identifiers form indicating that the signatory had 

reviewed the proposed transactions for red flags commonly associated with market 

manipulation in low-priced securities.  

32. The New Clearing Firm continued to communicate with the then AML CO and other 

Aegis personnel with additional questions concerning Customer A’s trading in Issuer B. 

33. For example, on April 17, 2013, the New Clearing Firm emailed the then AML CO and 

other Aegis personnel citing three websites on which it found evidence of Issuer B 

promotions and made three requests:  (i) describe the due diligence completed before 

executing Customer A’s transactions; (ii) describe how the relationship with Customer A 

was established; and (iii) identify Customer A’s underlying clients. 

34. Despite the AML Alert and questions from the New Clearing Firm, Customer A 

continued to trade low-priced securities at Aegis.  Accordingly, on May 20, 2013, the 

New Clearing Firm wrote yet again to the then AML CO about Customer A:   

As you know AML is really tweaked on this [Customer A] account.  

Because the account is continuing to trade in multiple securities 

which have been subject to regulatory inquiries, we need a concrete 

plan to address this situation as soon as possible.  In absence of 

receiving a mutually agreeable plan, AML going [sic] to be blocking 

transactions in the account beginning Tuesday prior to market 

opening. 

 

35. The CEO requested extensions from the New Clearing Firm so that Customer A could 

continue to trade while Aegis attempted to transition Customer A’s accounts to another 

broker-dealer.  Ultimately, Aegis closed Customer A’s accounts on September 13, 2013, 

at least in part because of concerns regarding the low-priced securities that were traded in 

them. 

36. Despite these red flags associated with the trading by Customer A and Aegis’ closure of 

the account due to the presence of suspicious activity, Aegis did not file a SAR and did 

not create written analyses or compile other records indicating that it even considered 



9 
 

 

filing a SAR.  The fact that Customer A’s account was a DVP/RVP account did not 

relieve Aegis of its SAR filing obligations with respect to that account. 

ii. Customer B 

37. Customer B is a British Virgin Islands company based in China that offers consulting and 

advisory services. 

38. In an approximately one month period beginning in April 2013, Customer B sold 

approximately 200,000 shares of Issuer C through Aegis for proceeds of $2.3 million, or 

over $10 per share.  Issuer C was listed on NASDAQ. 

39. Just six months prior to these sales, Issuer C’s share price was $0.45 per share.  And, a 

month prior to these sales, Issuer C’s share price was approximately $5 per share. 

40. On April 25, 2013, Customer B sent a request to wire approximately $600,000 of the $2.3 

million in proceeds to its bank account in Hong Kong. 

41. Regarding this request, an Aegis compliance employee wrote to the then AML CO, Aegis 

CEO, and COO to explain that the funds included in the transfer request were proceeds 

from Customer B’s trading and wrote “[Issuer C’s] share price has risen quite a bit in the 

past 6 months.  I’d prefer a member of senior management authorize and approve this 

wire.” 

42. After the COO asked whether Issuer C’s shares were restricted when they arrived at 

Aegis, the compliance employee replied to the then AML CO, the Aegis CEO, and COO 

“[c]lean shares but the sudden spike in price is a concern.”   

43. Notwithstanding the red flags the compliance employee raised, Aegis did not file a SAR 

concerning either the suspicious trading or the substantial proceeds wired offshore and 

did not create written analyses or compile other records indicating that it considered 

filing SARs.   

44. After the initial wire was sent to Customer B’s Hong Kong account in late April 2013, 

Customer B made requests to send two more wires totaling the remainder of the proceeds 

from the trading.  Then, On July 1, 2013, the New Clearing Firm sent Aegis an AML 

Alert regarding Customer B’s wire transfers described above.  The New Clearing Firm 

asked Aegis to (i) confirm the identity of the account’s beneficial owner; (ii) describe the 

source of the beneficial owner’s funds; and (iii) describe the purpose of the wires sent to 

Customer B’s Hong Kong bank account. 

45. Notwithstanding the receipt of the AML Alert from the New Clearing Firm and a 

subsequent regulatory request from FINRA that it received in late October 2013 

concerning trading in Issuer C at the firm, Aegis did not file a SAR concerning the 

substantial proceeds wired offshore and did not create written analyses or compile other 

records indicating that it even considered filing a SAR. 



10 
 

 

iii. Customer C 

46. In early November 2013, the New Clearing Firm sent another AML Alert, this time 

involving a different customer, Customer C.  Customer C had a DVP/RVP account at 

Aegis. 

47. On November 1, 2013, the New Clearing Firm sent Aegis an AML Alert outlining 

Customer C’s suspicious trading in several low-priced securities, including Issuers D and 

E and noting that in approximately six months Customer C had sold approximately 1 

billion shares of low-priced securities through Aegis (emphasis added).  Both Issuers D 

and E were traded on OTC Link. 

48. In its AML Alert, the New Clearing Firm noted that Customer C, between September 17 

and October 31, 2013, had sold 31% of Issuer D’s outstanding shares and that the average 

daily trading volume had increased by approximately five fold during Customer C’s 

trading while the share price had dropped by approximately 90%.  

49. Other evidence also indicates Issuer D may have been the subject of market 

manipulation.  In particular, Issuer D had experienced a rapid increase in the company’s 

stock price and volume that coincided with a promotional campaign that was inconsistent 

with the company’s financial performance as reflected in its SEC filings. 

50. With respect to Issuer E, the New Clearing Firm noted in its AML Alert that Issuer E had 

reported no revenues and that Customer C had sold over 60% of the company’s 

outstanding shares in two and a half months while the share price had dropped by 

approximately 50%. 

51. In addition to suspicious trading in Issuers D and E, the New Clearing Firm identified in 

the AML Alert similarly suspicious trading by Customer C in other low-priced securities 

including that Customer C – in one particular low-priced security – had sold more shares 

in three months than the issuer had outstanding. 

52. In the AML Alert, the New Clearing Firm requested a description of:  (i) the due 

diligence performed on the customer; (ii) the due diligence performed on the securities 

Customer C liquidated in the account; and (iii) how Aegis was comfortable with the 

activity in the account.  

53. On November 5, 2013, the then AML CO informed the New Clearing Firm that Aegis 

had reviewed Customer C’s account activity and its account opening paperwork and had 

decided to close the account, which it did, at least in part, because of the AML concerns 

outlined in the AML Alert.   

54. Despite these red flags associated with the trading by Customer C and Aegis’ closing the 

account due to the presence of suspicious activity, Aegis did not file a SAR.  Moreover, 

Aegis did not create written analyses or compile other records indicating that it even 

considered filing a SAR.  The fact that Customer C’s account was a DVP/RVP account 

did not relieve Aegis of its SAR filing obligations with respect to that account. 



11 
 

 

iv. Customer D 

55. Another Aegis customer – Customer D – engaged in suspicious low-priced securities 

transactions for which Aegis did not file a SAR.  Customer D was a foreign financial 

institution with a DVP/RVP account at the firm and traded on behalf of underlying 

customers who were unknown to Aegis. 

56. Over an approximately six-month period beginning in late May 2013, Customer D sold 

approximately 457,000 shares of Issuer F for proceeds of approximately $2.8 million.  

Issuer F traded on OTC Link.  Just prior to the trading – and coinciding with a 

promotional campaign – Issuer F’s share price climbed from $3.90 to $9.39 on 

substantially increased volume. 

57. Customer D was not the only Aegis customer who traded suspiciously in Issuer F.  

Starting approximately two months before Customer D’s trading, Customers A and E 

sold a substantial amount of Issuer F shares for substantial proceeds.  Customer E was yet 

another foreign financial institution with a DVP/RVP account at the firm and traded on 

behalf of underlying customers who were unknown to Aegis; it was incorporated in New 

Zealand and operated from Switzerland. 

58. In particular, Customer A sold approximately 638,000 shares of Issuer F for proceeds of 

approximately $3.7 million while Customer E sold approximately 494,000 shares of 

Issuer F for proceeds of approximately $3.3 million.  Thus, together Customers A and E 

sold over one million shares of Issuer F for proceeds of approximately $7 million. 

59. Despite these red flags associated with the trading by Customer D, Aegis did not file a 

SAR regarding the above trading. 

60. In early June 2013 – just a few weeks after Customer D began its trading in Issuer F – 

Customer D traded in another low-priced security transaction, this time Issuer G.  Issuer 

G also traded on OTC Link. 

61. Between June 11 and 17, 2013 and during a paid promotional campaign for Issuer G, 

Customer D sold approximately 340,000 shares of Issuer G for proceeds of 

approximately $248,000.   

62. Moreover, another Aegis customer, Customer F, traded suspiciously in Issuer G at the 

same time as Customer D did.  In particular, Customer F sold approximately 760,000 

shares of Issuer G through Aegis during the promotion for proceeds of approximately 

$840,000.  Customer F was yet another foreign financial institution with a DVP/RVP 

account at the firm and traded on behalf of underlying customers who were unknown to 

Aegis. 

63. On December 2, 2013, the New Clearing Firm sent an AML Alert to Aegis regarding 

Customer D’s trading in Issuer G, and wrote that the trading “exhibited characteristics 

commonly associated with a pump-and-dump scheme; including paid stock promotion, a 



12 
 

 

significant increase in both price and trading volume, followed by a precipitous drop in 

price and volume.” 

64. In the AML Alert, the New Clearing Firm also noted that Issuer G had changed both its 

name and business line (to a medical device company from an auto parts manufacturer), 

had no revenue and minimal trading volume until the stock promotion began, and that 

Customer D’s trading was similar to the suspicious trading by two other Aegis customers 

that had prompted the New Clearing Firm to request that those accounts be closed earlier 

in the year. 

65. Aegis ultimately closed Customer D’s accounts, at least in part, because of the AML 

concerns associated with it. 

66. Despite these red flags associated with the trading by Customer D and at least one other 

Aegis customer in Issuer G, as well as the closing of Customer D’s account due at least in 

part to concerns regarding low-priced securities transactions, Aegis never filed a SAR.  

Moreover, Aegis did not create any written analyses or compile other documents 

indicating that it considered filing a SAR.  The fact that the above described accounts 

were DVP/RVP accounts did not relieve Aegis of its SAR filing obligations with respect 

to those accounts. 

E. November 18, 2013 DVP/RVP Update to Written Supervisory Procedures 

67. On November 18, 2013 –in response to the deficiencies identified in an examination by 

the SEC’s Office of Compliance Inspections and Examinations – Aegis updated its 

written supervisory procedures to require that low-priced securities transactions in 

DVP/RVP accounts be subjected to the same due diligence as cash accounts when 

customers deposited physical securities.   

68. In particular, Aegis’ updated written supervisory procedures required Aegis’ DVP/RVP 

customers to submit Deposited Securities Request Questionnaires (“DSRQs”) for any 

low-priced securities it wished to trade and required Aegis to complete due diligence to 

identify red flags associated with the issuers of low-priced securities. 

69. DSRQs include, among other things, information about how the customer obtained a 

particular security, whether the customer is an affiliate of the issuer, and how many 

shares of the security the customer owns.  DSRQs had to be filled out by the customer 

and approved by the registered representative and a member of Aegis’ management 

before any trading was to occur.   

F. Customer G 

70. Notwithstanding this update to Aegis’ written supervisory procedures, however, at least 

one of Aegis’ DVP/RVP customers (Customer G) traded suspiciously in low-priced 

securities and did so before the required DSRQ process had been completed.  Customer 

G, a New York corporation, is a microcap hedge fund that held a DVP/RVP account at 

Aegis. 



13 
 

 

71. Between February 10, 2014 and February 20, 2014, Customer G sold 705.9 million 

shares of Issuer H through Aegis for proceeds of approximately $1.24 million.  Issuer H 

traded on OTC Link. 

72. On February 19, 2014, the New Clearing Firm sent an AML Alert to Aegis explaining 

that it was going to block Customer G’s account at market close because, among other 

reasons, Customer G had already sold 200 million shares of Issuer H that day and 2.7 

billion shares of low-priced securities since it opened its account.   

73. In addition to the suspicious trading, there were other indicia that Issuer H may have been 

the subject of market manipulation.  For example, Issuer H experienced a large increase 

in price and volume that coincided with a promotional campaign.  Moreover, the 

company’s name had changed several times before becoming Issuer H.   

74. The AML Alert was not limited to the suspicious Issuer H trades; it also described 

suspicious trading by Customer G in over 1.6 billion shares of the securities of ten 

additional microcap issuers.  

75. The New Clearing Firm subsequently asked for an explanation of:  (i) the due diligence 

Aegis performed on the customer; (ii) the due diligence Aegis performed on the securities 

liquidated in the account; and (iii) how Aegis was comfortable with the activity.    

76. Even after Aegis received the AML Alert concerning Customer G’s trading, Customer G 

continued to trade in Issuer H.  Indeed, on February 19 and 20, 2014, Customer G sold an 

additional 120 million shares of Issuer H. 

77. On February 25, 2014, before Aegis had responded to the New Clearing Firm, it received 

a regulatory request from FINRA regarding trading in Issuer H at the firm.  On March 14, 

2014, Aegis received a second regulatory request from FINRA. 

78. At the time of Customer G’s trading in February 2014, Aegis had already implemented 

its new DSRQ policy for trading in DVP/RVP accounts.  The DSRQ packet for Customer 

G’s trading in Issuer H, however, was not signed by any of the required Aegis personnel 

and, thus, Customer G should never have been allowed to liquidate any of its Issuer H 

shares through Aegis.  

79. Despite the significant trading by Customer G in Issuer H and the other red flags 

associated with the transactions, Aegis never filed a SAR.  Moreover, Aegis did not 

create written analyses or compile other records indicating the consideration of filing a 

SAR.  The fact that Customer G’s account was a DVP/RVP account did not relieve Aegis 

of its SAR filing obligations with respect to that account. 

VIOLATION 

80. The Bank Secrecy Act (“BSA”), and implementing regulations promulgated by the 

Financial Crimes Enforcement Network (“FinCEN”), require that broker-dealers file 

SARs with FinCEN to report a transaction (or a pattern of transactions of which the 

transaction is a part) conducted or attempted by, at, or through the broker-dealer 



14 
 

 

involving or aggregating to at least $5,000 that the broker dealer knows, suspects, or has 

reason to suspect:  (1) involves funds derived from illegal activity or is conducted to 

disguise funds derived from illegal activities; (2) is designed to evade any requirement of 

the BSA; (3) has no business or apparent lawful purpose and the broker-dealer knows of 

no reasonable explanation for the transaction after examining the available facts; or (4) 

involves use of the broker-dealer to facilitate criminal activity. 31 C.F.R. § 

1023.320(a)(2). 

81. Exchange Act Rule 17a-8 requires broker-dealers to comply with the reporting, record-

keeping, and record retention requirements of the BSA.  The failure to file a SAR as 

required by the SAR Rule is a violation of Section 17(a) of the Exchange Act and Rule 

17a-8 thereunder. 

82. By engaging in the conduct described above, Aegis willfully violated Section 17(a) of the 

Exchange Act and Rule 17a-8 thereunder. 

REMEDIAL EFFORTS 

83. In determining to accept the Offer, the Commission considered remedial acts undertaken 

by Respondent.  Aegis retained a third-party AML compliance consultant (“Compliance 

Consultant”) with whom it had never worked before to conduct a review of Aegis’ AML 

program relating to transactions and/or business in low-priced securities and Aegis’ 

handling of DVP/RVP accounts, including Aegis’ relevant policies and procedures, for 

compliance with the Bank Secrecy Act.  For the purpose of this review, “low-priced 

security” and “low-priced securities” meant any equity security that trades at or below $5 

per share. 

84. The Compliance Consultant submitted to the Commission’s staff a written report (the 

“Report”) describing the review it performed, the names of the individuals who 

performed the review, the conclusions reached, and the Compliance Consultant’s 

recommendations for changes in or improvements to Aegis’ policies and procedures. 

UNDERTAKINGS 

Aegis has undertaken to: 

85. Compliance Consultant.  With respect to its retention of the Compliance Consultant, 

Aegis has agreed to the following undertakings: 

a. Aegis will continue to retain the services of the Compliance Consultant to 

complete the tasks, as outlined in these undertakings, associated with the review 

and Report described in paragraphs 83-84.  The Compliance Consultant’s 

compensation and expenses shall be borne exclusively by Aegis.   

b. Aegis shall adopt all recommendations contained in the Report within sixty (60) 

days the issuance of this Order; provided, however, that within thirty (30) days 

after the date of the Order’s issuance, Aegis shall in writing advise the 

Compliance Consultant and the Commission staff of any recommendations that 



15 
 

 

Aegis considers to be unduly burdensome, impractical, or inappropriate.  With 

respect to any recommendation that Aegis considers unduly burdensome, 

impractical, or inappropriate, Aegis need not adopt that recommendation at that 

time but shall propose in writing an alternative policy, procedure, or system 

designed to achieve the same objective or purpose.  

c. As to any recommendation with respect to Aegis’ policies and procedures on 

which Aegis and the Compliance Consultant do not agree, Aegis and the 

Compliance Consultant shall attempt in good faith to reach an agreement within 

sixty (60) days after the date this Order is issued.  Within fifteen (15) days after 

the conclusion of the discussion and evaluation by Aegis and the Compliance 

Consultant, Aegis shall require that the Compliance Consultant inform Aegis and 

the Commission staff in writing of the Compliance Consultant’s final 

determination concerning any recommendation that Aegis considers to be unduly 

burdensome, impractical, or inappropriate.  Aegis shall abide by the 

determinations of the Compliance Consultant and, within thirty (30) days after 

final agreement between Aegis and the Compliance Consultant or final 

determination of the Compliance Consultant, whichever occurs first, Aegis shall 

adopt and implement all of the recommendations that the Compliance Consultant 

deems appropriate. 

d. Within thirty (30) days of Aegis’ adoption of all of the recommendations in the 

Report that the Compliance Consultant deems appropriate, as determined pursuant 

to the procedures set forth herein, Aegis shall certify in writing to the Compliance 

Consultant and the Commission staff that Aegis has adopted and implemented all 

of the Compliance Consultant’s recommendations in the Report.  Thereafter, 

beginning one hundred eighty days (180) after the entry of this Order, the 

Compliance Consultant shall conduct such review as it deems appropriate to 

verify that Aegis has appropriately implemented the recommendations in the 

Report.  Prior to two hundred and ten (210) days after the entry of this Order, the 

Compliance Consultant shall confirm to the Commission staff that Aegis has 

adopted and implemented all of the Compliance Consultant’s recommendations in 

the Report.  Unless otherwise directed by the Commission staff, all Reports, 

certifications, and other documents required to be provided to the Commission 

staff shall be sent to Antonia Chion, Associate Director, Division of Enforcement, 

Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 

20549, or such other address as the Commission staff may provide. 

e. On the anniversary of the date of the submission of the Report described in 

paragraph 84, the Compliance Consultant shall conduct a review to determine 

whether: (1) Aegis is implementing all of the Compliance Consultant’s 

recommendations adopted pursuant to the foregoing provisions and this provision; 

and, (2) there have been any changes in the law or Aegis’ business operations 

such that the recommendations should be amended and updated to take into 

account any such changed circumstance.  Within forty-five (45) days after the 

anniversary date of the submission of the Report, the Compliance Consultant shall 

submit a written and dated report of its findings to Aegis and the Commission 



16 
 

 

staff (the “Anniversary Report”).  Aegis shall require that the Anniversary Report 

include a description of the review performed, the names of the individuals who 

performed the review, the conclusions reached, and any further recommendations 

concerning changes in or improvements to Aegis’ policies and procedures 

directed at effecting implementation of the recommendations in the initial Report 

or the Anniversary Report or directed at addressing any changes in the law or 

business.  Any recommendations made in the Anniversary Report shall be subject 

to the same processes set forth in subparagraphs 85(b) through (d).  

f. Aegis shall cooperate fully with the Compliance Consultant and shall provide the 

Compliance Consultant with access to such of its files, books, records, and 

personnel as are reasonably requested by the Compliance Consultant for review. 

g. To ensure the independence of the Compliance Consultant for the remainder of 

the engagement, Aegis:  (1) shall not have the authority to terminate the 

Compliance Consultant or substitute another compliance consultant for the 

Compliance Consultant without the prior written approval of the Commission 

staff; and (2) shall compensate the Compliance Consultant and persons engaged 

to assist the Compliance Consultant for services rendered pursuant to this Order at 

their reasonable and customary rates. 

h. Aegis shall maintain its agreement with the Compliance Consultant, which 

provides that for the period of engagement and for a period of two (2) years from 

completion of the engagement, the Compliance Consultant shall not enter into any 

employment, consultant, attorney-client, auditing or other professional 

relationship with Aegis, or any of its present or former affiliates, directors, 

officers, employees, or agents acting in their capacity as such.  Aegis shall 

similarly maintain its agreement with the Compliance Consultant requiring that 

any firm with which the Compliance Consultant is affiliated or of which the 

Compliance Consultant is a member, and any person engaged to assist the 

Compliance Consultant in the performance of the Compliance Consultant’s duties 

under this Order shall not, without prior written consent of the Commission staff, 

enter into any employment, consultant, attorney-client, auditing or other 

professional relationship with Aegis, or any of its present or former affiliates, 

directors, officers, employees, or agents acting in their capacity as such for the 

period of the engagement and for a period of two (2) years after the engagements. 

i. Recordkeeping.  Aegis shall preserve for a period of not less than six years from 

the end of the fiscal year last used, the first two years in an easily accessible place, 

any record of its compliance with the undertakings set forth herein.  

86. Deadlines.  For good cause shown, the Commission staff may extend any of the 

procedural dates relating to the undertakings.  Deadlines for procedural dates shall be 

counted in calendar days, except that if the last day falls on a weekend or federal holiday, 

the next business day shall be considered to be the last day.  



17 
 

 

87. Certifications of Compliance by Respondents.  Aegis shall certify, in writing, compliance 

with its undertakings set forth above.  The certification shall identify the undertakings, 

provide written evidence of compliance in the form of a narrative, and be supported by 

exhibits sufficient to demonstrate compliance.  The Commission staff may make 

reasonable requests for further evidence of compliance, and Aegis agrees to provide such 

evidence.  The certification and supporting material shall be submitted to Antonia Chion, 

Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 

F Street, N.E., Washington, D.C. 20549, or such other address as the staff of the 

Commission may provide, with a copy to the Office of Chief Counsel of the Enforcement 

Division, no later than sixty (60) days from the date of the completion of the 

undertakings. 

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in Respondent Aegis’ Offer.  

 

 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) 

of the Advisers Act it is hereby ORDERED that Aegis: 

 

A. cease and desist from committing or causing any violations and any future violations of 

Section 17(a) of the Exchange Act and Rule 17a-8 thereunder; 

 

B. is censured; 

 

C. shall pay a civil monetary penalty in the amount of $750,000 to the Securities and 

Exchange Commission for transfer to the general fund of the United States Treasury, 

subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional 

interest shall accrue pursuant to 31 U.S.C. §3717.  Payment shall be made in the 

following installments:  $75,000 within ten (10) days after the institution of this Order, 

with the remaining civil penalties, and interest accrued pursuant to 31 U.S.C. § 3717, due 

in nine (9) monthly installments of $75,000 beginning on the first day of the month 

following the institution of this Order and continuing on the first day of each month 

thereafter for eight (8) months.   

 

If any payment is not made by the date the payment is required by this Order, the entire 

outstanding balance of the civil penalties, plus any additional interest accrued pursuant to 

31 U.S.C. 3717, shall be due and payable immediately, without further application.    

 

Payment must be made in one of the following ways: 

 

1. Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request; 

2. Respondent may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or 



18 
 

 

3. Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to: 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Aegis as Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Antonia Chion, 

Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 

F Street NE, Washington, DC 20549. 

 

Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  

To preserve the deterrent effect of the civil penalty, Respondent agrees that in any 

Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, 

offset or reduction of any award of compensatory damages by the amount of any part of 

Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 

any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, 

within 30 days after entry of a final order granting the Penalty Offset, notify the 

Commission’s counsel in this action and pay the amount of the Penalty Offset to the 

Securities and Exchange Commission.  Such a payment shall not be deemed an additional 

civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or more 

investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

 

D. shall comply with the undertakings enumerated in Section III above. 

 

By the Commission. 

   

  Brent J. Fields 

Secretary