← Broker database 2023-10-26
Mark Bedros Beloyan Suspended 2 Years for Unregistered Securities Sales and AML Failures
According to FINRA, Mark Bedros Beloyan was assessed a deferred fine of $60,000, suspended from association with any FINRA member in all capacities for two years, and ordered to pay deferred disgorgement of $27,260 in commissions plus prejudgment interest for facilitating the liquidation of nearly 23 million shares of common stock to the investing public when there was no registration statement filed or in effect or exemption from registration available, acting in contravention of Section 5 of the Securities Act of 1933.
The customers who liquidated these shares through Beloyan's member firm generated proceeds of approximately $577,000 in these violative transactions. Beloyan was a necessary participant and substantial factor in these illegal sales because he opened all customer accounts, reviewed and approved all stock deposits, executed all sales through the firm, served as the registered representative for the accounts, and was solely responsible for all supervision and compliance functions at the firm. As the firm's AML compliance officer, Beloyan was responsible for supervision and compliance with FINRA rules and federal securities laws.
Beloyan failed to supervise for compliance with the Securities Act. In violation of the firm's written supervisory procedures, he failed to investigate red flags of violative activity and failed to conduct due diligence sufficient to determine if the share sales were registered or exempt from registration. He was aware, or through reasonable diligence should have been aware, of facts supporting the conclusion that these sales were part of an unregistered distribution. Additionally, Beloyan failed to implement an AML program reasonably designed to achieve and monitor compliance with the Bank Secrecy Act, including the ability to detect and cause reporting of suspicious activities.
The findings also included that Beloyan was aware of numerous red flags of potentially suspicious activity in connection with a different group of customer accounts. The firm, Beloyan, and another representative opened three nominee accounts for customers of an individual whom the SEC had twice sued in connection with unrelated penny-stock manipulation schemes. When the clearing firm asked directly about the relationship of that individual to one nominee customer, Beloyan misrepresented the nature of the relationship and denied the individual's involvement despite both Beloyan and the representative having taken instructions directly from that individual. Thereafter, Beloyan ignored numerous red flags including trading of six different penny stocks before the clearing firm closed the nominee accounts.
For investors, this case illustrates the serious risks of unregistered penny stock distributions and the importance of broker-dealer compliance systems. Section 5 of the Securities Act requires that securities offered to the public either be registered with the SEC or qualify for an exemption from registration. Registration requirements exist to ensure investors receive material information about securities before investing. When brokers facilitate unregistered sales without available exemptions, they enable fraud and expose investors to unregistered securities that may be worthless. The involvement of nominee accounts, an individual with history of SEC enforcement actions, and penny stocks are all red flags of potential manipulation schemes. Investors should be extremely cautious about penny stock investments and should verify that any securities purchases are either registered or properly exempt from registration.