Delaney Equity Group, LLC -Palm Beach Gardens, Florida and David Cameron Delaney West Palm Beach, Florida named respondents in a FINRA complaint alleging that the firm, acting through Delaney, its president/CCO/AMLCO, failed to conduct adequate due diligence to determine whether
they were participating in a scheme to evade the registration requirements of Section 5 of the Securities Act of 1933 by selling shares of low-priced equity securities that were
unregistered and non-exempt. A firm customer had obtained almost $2.4 million through the sale of these securities, which ceased only when the firm’s clearing firm restricted
the customer’s accounts. The complaint alleges that the firm, acting through Delaney, relied on opinion letters by one counsel representing all of the issuers, who was later
found to have issued inaccurate correspondence to the OTC markets and failed to note the contradiction in the customer’s actions and representations. The firm, acting through
Delaney, sold almost a billion shares of common stock on the customer’s behalf that were not registered with the SEC, and no exemption from registration applied to such sales. The
complaint also alleges that the firm, acting through Delaney, failed to establish, maintain and enforce adequate policies and procedures, including WSPs, reasonably designed to
ensure compliance with Section 5 of the Securities Act to prevent the sale of unregistered securities not exempt from registration. The firm, acting through Delaney, failed to develop and implement AML policies, procedures and internal controls reasonably designed to achieve compliance with the BSA and implementing regulations. The complaint further alleges that the AML procedures failed to address the detection, monitoring, analyzing, investigating and reporting of suspicious activity in the context of its securities liquidation business. The firm and Delaney should have detected the suspicious nature of a customer’s liquidation of low-priced securities, investigated the activity and made suspicious activity report (SAR) filings as necessary but instead, permitted the customer’s suspicious trading
activity to occur and failed to report any activities through a SAR as necessary. In addition, the complaint alleges that the firm, acting through Delaney, either failed to identify or
ignored red flags involving numerous instances of potentially suspicious activities, and thus failed to sufficiently investigate and, if necessary, report these activities in accordance
with its WSPs, the requirements of the BSA, and implementing regulations. Moreover, the complaint alleges that when the firm became a FINRA member firm, it agreed, as part of its membership agreement, that a registered representative would be subjected to heightened supervision.