New York-based broker-dealer OTC Link just got nailed by the Securities and Exchange Commission (SEC) for what they believe to be a colossal screw-up.
Over three years, OTC Link didn’t bother to file even a single Suspicious Activity Report (SAR), something they’re legally required to do. The fine? $1.19 million.
OTC Link operates three alternative trading system (ATS) platforms—OTC Link ATS, OTC Link ECN, and OTC Link NQB.
The SEC says these platforms are the go-to places for broker-dealers who handle tens of thousands of transactions every day in the over-the-counter (OTC) securities market.
We’re talking microcap or penny stocks here—the type that’s risky and often ripe for manipulation. So, when the SEC found out that OTC Link hadn’t been filing SARs from March 2020 to May 2023, it decided to take action.
The company didn’t have proper policies in place to flag suspicious transactions, which is a big no-no in the financial world.
These SARs are important because they alert the authorities to potential securities law violations or money laundering activities.
Tejal D. Shah, the Associate Regional Director of the SEC’s New York Regional Office, explained that broker-dealers like OTC Link are supposed to be the “gatekeepers” of the securities markets.
“When firms like OTC Link fail to file SARs, they deprive regulators and law enforcement of important information about suspicious activity.”
But the fine isn’t the only thing OTC Link has to deal with. The SEC’s order hit them with a censure and a cease-and-desist order.
And if that wasn’t enough, the SEC is making sure OTC Link gets its act together by forcing them to keep a compliance consultant on board.
This consultant’s job is to review and overhaul OTC Link’s AML policies and procedures, so this kind of negligence doesn’t happen again.
