According to FINRA, Hinman Au was fined $20,000 and suspended for 45 days in all capacities and 18 months in any principal capacity for multiple failures as his firm's AML Compliance Officer.
As AMLCO, Au drafted the firm's AML procedures which stated he would detect market manipulation and create parameters for reviewing trades and wire transfers. However, Au never created such parameters or described how they should be set. Although procedures required exception reports to detect unusual transactions, Au did not identify specific reports, describe how supervisors should use them, or what activity should trigger action. Au relied almost exclusively on manual review of the daily trade blotter, which was unreasonable given the volume and complexity of customer trading and did not reflect patterns across accounts or days.
Au failed to implement the firm's Customer Identification Program for retail and institutional customer accounts in foreign jurisdictions. He failed to reasonably supervise for potentially manipulative trading and did not detect potential market manipulation including matched orders. When FINRA and the clearing broker brought potential manipulation to his attention, Au unreasonably relied on unverified customer representations about future prevention steps.
Au also caused the firm to maintain incomplete books and records by using instant messaging to communicate about securities business with a firm-associated person and using personal email to communicate with another FINRA member regarding potential IPO investor referrals, without retaining copies for the firm to preserve.
The suspensions totaling over 19 months hold Au accountable for serious failures in his role as AMLCO and principal, which created significant risks of undetected suspicious activity and market manipulation.