According to FINRA, Maxim Group LLC was fined $500,000 and required to retain an independent consultant to review its AML policies and compliance with Section 5 of the Securities Act.

The firm failed to establish and maintain adequate supervisory systems and written procedures to achieve compliance with Section 5 of the Securities Act, which governs the registration of securities. The firm conducted reviews only when customers deposited securities at the firm. For Delivery versus Payment/Receive versus Payment (DVP/RVP) accounts, the firm relied on due diligence performed by other firms that held the accounts as agents for customers. The firm did not have written procedures specifically designed to address Section 5 compliance for DVP/RVP accounts and did not take reasonable steps to ensure that transactions were exempt from registration. As a result, the firm executed sales of securities for DVP/RVP accounts when it lacked sufficient information to determine whether the securities were exempt from registration. The firm also failed to respond reasonably to red flags of potentially unregistered distributions, including failing to investigate customers' sales of low-priced securities on multiple days.

From an AML perspective, the firm failed to establish and implement policies and procedures reasonably expected to detect and cause the reporting of suspicious activity in low-priced securities. The firm did not have any AML procedures that specifically addressed DVP/RVP accounts and did not collect required information from customers with DVP/RVP accounts. The firm closed hundreds of alerts of suspicious trading in DVP/RVP accounts after conducting only minimal investigation and without sufficient analysis of whether the trading required filing a SAR.

This case highlights the risks associated with low-priced securities and the importance of firms having robust procedures to prevent unregistered distributions and detect suspicious activity. Investors should be particularly cautious with low-priced securities and DVP/RVP arrangements.