The U.S. Financial Industry Regulatory Authority (FINRA) has fined brokerage firm Aegis Capital Corp. US$950,000 for improperly selling unregistered penny stocks, related supervisory failures and for failing to implement anti-money laundering (AML) policies and procedures.

In addition, two Aegis compliance officers also agreed to fines and suspensions while Robert Eide, the firm’s president and CEO was suspended for 15 days and fined $15,000 for failing to disclose more than $640,000 in outstanding liens in a separate proceeding.

In settling the allegations, the respondents neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. In addition to the monetary penalty, Aegis is also required to retain an independent consultant to review its supervisory and AML systems and procedures.

FINRA reports that it found that Aegis liquidated almost 3.9 billion shares of five penny stocks from April 2009 to June 2011 that were not registered with the Securities and Exchange Commission and not exempt from registration. Despite numerous “red flags” associated with the transactions, Aegis sold the unregistered shares in violation of the registration requirements, FINRA’s announcement states.

FINRA’s investigation found that the violations resulted, in part, from the supervisory failures of Aegis and its two chief compliance officers as the firm did not have a supervisory system reasonably designed to prevent the distribution of unregistered securities and did not adequately implement an AML program.

“Firms who open their doors to penny stock liquidators must have robust systems and procedures to ensure strict adherence to the registration and AML rules given the significant risk of investor fraud and market manipulation,” says Brad Bennett, executive vice president and chief of enforcement at FINRA, in a statement.

“The compliance officers sanctioned in this case were directly responsible for supervising sales of restricted securities but failed to conduct a meaningful inquiry in the presence of significant red flags indicating the sales could be illicit distributions of unregistered stocks,” he adds.