SEC?s Use of SARs Filed by Firms
SEC Enforcement and the Office of Compliance Inspections and Examinations (OCIE) review, in both the enforcement and examination contexts, all new SAR-SF forms that are filed. SARs are reviewed by the SEC for three primary purposes: (i) to identify any information that may relate to existing SEC Enforcement investigations or OCIE examinations, (ii) to identify any ongoing matters that should be referred for a possible new Enforcement investigation or OCIE examination, and (iii) to identify any ongoing securities fraud matters that merit further investigation or examination by the Financial Industry Regulatory Authority or a state or federal law enforcement agency.
The SEC?s proactive review of SARs has resulted in a number of new investigations and examinations and has assisted in many active investigations and examinations. These investigations have included matters concerning insider trading, offering frauds, market manipulation, embezzlement of client funds by a registered representative, unregistered broker-dealer or investment adviser conduct, and advance fee schemes. For example, based on information from a SAR review, the Commission filed an emergency enforcement action to halt an alleged ongoing Ponzi scheme and obtained a temporary restraining order that included a substantial asset freeze. In addition, based on a SAR review, SEC staff initiated a cause examination of a broker-dealer to investigate, among other things, whether a firm was attempting to avoid its prime broker?s credit limits on trades by cancelling a series of trades in a client?s accounts in violation of the Commission?s short sale requirements. This examination resulted in a deficiency letter to the firm addressing the firm?s failures to ensure the safety of client assets, properly allocate trades, and properly designate discretionary adviser transactions.
Excerpted from SAR Activity Review Issue 15, page 18
First published on 05/01/2009