On Mar. 8, SEC fined Merrill $1.17mn for unregistered securities.
- Bank failed to perform gatekeeping on behalf of China-based issuer and affiliates.
- Dealer has duty to inquire and know customer, before making unregistered sales.
- Re 3mn shares sold of Longtop Financial Technological securities despite red flags.
- Failures to perform gatekeeping functions, in the unregistered sales for the issuer.
- Warnings indicated these sales could be part of unlawful unregistered distribution.
- Ultimately distribution generated almost $38mn, for overseas issuer and affiliates.
- $1.25mn penalty; $154k disgorgement, and prejudgment interest on commissions
and fees earned on improper sales, SEC revoked registration of Longtop securities.
- SEC also granted firm waiver, of the rule 506(d)(1)(v)(b) disqualification provision.