Reporting liquidating distributions
Kessler, a former senior supervisor of Cantor Fitzgerald & Co.'s equities business, failed to respond adequately to a number of red flags indicating the firm's existing supervisory system was insufficient to support the expansion of Cantor & Co.'s microcap liquidation business.
In particular, Kessler knew that the expanding microcap business posed unique challenges and was generating an increasing number of regulatory inquiries, but nonetheless delegated his supervisory responsibilities to a central review group without taking sufficient steps to investigate the adequacy of their efforts.
Among Cantor Fitzgerald & Co.'s failings were insufficient guidance and inadequate training about when or how to inquire into whether a sale was exempt, and inadequate tools for supervisors to identify red flags associated with illegal, unregistered distributions.
FINRA found that Cantor Fitzgerald & Co.'s supervisory system was not reasonably designed to satisfy the firm's affirmative obligation to determine whether the microcap securities that it was liquidating for clients were registered with the Securities and Exchange Commission or subject to an exemption from registration. made a business decision to expand its microcap liquidation business in March 2011, it failed to ensure that its supervisory system included a reasonable and meaningful inquiry into whether these sales were lawful.
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