The U.S. Securities and Exchange Commission (SEC) announced today that it has settled charges against registered broker-dealer Maxim Group, LLC, which violated federal securities laws regarding the execution of short sales and the filing of suspicious activity reports (SAR).。

To help detect potential securities law violations and money laundering, broker-dealers are required to file suspicious activity reports describing suspicious transactions conducted through their companies.。By order of the SEC, at least from January 2018 to January 2019, Maxim facilitated the flow of orders from other broker-dealers who engaged in the sale of large quantities of low-priced over-the-counter micro-cap securities but did not adequately design or implement their anti-money laundering policies and procedures to reasonably address the risks associated with that business.。

The order further determined that as a result of these deficiencies and Maxim's failure to adequately investigate red signals, Maxim failed to submit a large number of suspicious transactions to SAR.。

In addition, under the order, Maxim facilitates "unheld" long sell orders for low-priced securities from its broker clients, usually by executing a series of principal short sales in one day and buying shares from broker clients at lower prices to cover their short positions back and forth.。However, the order argues that Maxim did not "locate" the shares to be borrowed before implementing the short selling clause of the SHO。

The SEC order found that Maxim knowingly violated Section 17 (a) of the Exchange Act and Section 17a-8 thereunder, and Section 203 (b) (1) of the SHO Regulation under the Exchange Act.。

Maxim neither admitted nor denied the SEC's findings, agreed to accept the cease-and-desist order and censure, and agreed to pay a $800,000 civil penalty.。