On October 6, FINRA announced that it had censured and fined a New York-based broker-dealer $800,000 for alleged AML and supervisory violations tied to small-cap IPOs of predominantly foreign-based issuers that bore hallmarks of “ramp-and-dump” schemes. Under the letter of acceptance, waiver and consent, the firm consented to the findings without admitting or denying them and agreed to continue retaining a third-party consultant it had already engaged. Since 2022, the firm has served as a lead underwriter or selling group member in about 60 small-cap IPOs, more than 40 of which involved Hong Kong- or China-based issuers, and FINRA said some of those offerings saw share prices spike and then collapse, producing millions of dollars in secondary market losses. According to FINRA, the firm did not detect or investigate customer trading with signs of potential manipulation, including IPO allocations concentrated among a small number of accounts and seemingly unrelated customers who shared addresses and traded in nearly identical patterns.

FINRA Rule 3310 requires member firms to maintain an AML program reasonably designed to achieve compliance with the BSA, including policies that can reasonably be expected to detect and cause the reporting of suspicious transactions to FinCEN. FINRA found that the firm’s AML procedures were not tailored to the risks of its small-cap IPO business. It also found that the firm relied solely on manual daily blotter reviews and did not begin implementing automated surveillance until late 2025, even though its 2017 AML settlement with FINRA had found such reviews “not reasonably designed to detect patterns of potentially suspicious activity.” FINRA further found that the firm did not reasonably verify customer identities or develop customer risk profiles, did not conduct required independent AML testing for 2022 and 2023, and maintained a supervisory system that was not reasonably designed to detect red flags of potential manipulation, in violation of FINRA Rules 3310, 3110 and 2010. FINRA noted that its October 2025 review of firm practices for small-cap offerings by foreign-based issuers, which began after this matter was underway, remains ongoing.