Unsolicited trades for stock broker

Help....I got this client (friend of my friend), and hes great generating alot of commission $ for me. Hes quite sophisticated investor, but all he ever purchase is pink sheet and otcbb stocks, and does it in blocks of $50,000-$100,000 every time(sometimes 2-4 times a month). I came from a back groud of trading, and I smell something funny here. Its interesting how he can invest in something so illiquid with so much $ at a time but yet generate profit most of the time. One theory that i have is that hes a stock promoter, which is completely legal to do when its done correctly with the right disclosures, and another theory i have is that hes a pump and dumper.... Now, becuz all of his trades are"unsolicited", which means they are his wills and he understands the risk......if 6 months or 1 year from now he gets arrested for pumping and dumping penny stocks, could I get in trouble even though they were "unsolicited trades" and I have the reasons to believe that hes sophisticated and understands the risk involed?

Answers from other experienced brokers and securities lawyers would be very helpful.

Thanks agin!!!

p.s : If ur just trolling.......oh well, have fun I guess.

 
Best Response
LAWM:
Speak to your compliance guys

This might be the worst advice on WSO EVER, and that's saying something. Whatever you do, do NOT go to compliance.

As long as the trades are unsolicited, you are perfectly fine. There are a couple of ways you can completely fuck yourself if he's shady, however. First and foremost, resist the temptation to mirror his trades in your own account. I know that should go without saying, but I also understand the temptation having been there myself. That means no tipping off any of your buddies and taking a cut of their profits, either.

Also, be careful he's not covering stock sales with 144 stock or other restricted instruments. Ultimately, it'll be on him if he is, but the SEC loves to tie a brokerage in with that shit, especially if a bent transfer agent rolls on the brokerage. If he's running these trades in a DvP account, you have a reason to be concerned. If he's running all of his buys and sells through you, then you're probably okay.

Ultimately, it's about making gross. Don't look a gift horse in the mouth.

 
Edmundo Braverman:
Ultimately, it's about making gross. Don't look a gift horse in the mouth.

At the top of Eddie's post you'll find the worst advice of all time, and at the bottom... the best.

I hate victims who respect their executioners
 
Edmundo Braverman:
LAWM:
Speak to your compliance guys

This might be the worst advice on WSO EVER, and that's saying something. Whatever you do, do NOT go to compliance.

As long as the trades are unsolicited, you are perfectly fine. There are a couple of ways you can completely fuck yourself if he's shady, however. First and foremost, resist the temptation to mirror his trades in your own account. I know that should go without saying, but I also understand the temptation having been there myself. That means no tipping off any of your buddies and taking a cut of their profits, either.

Also, be careful he's not covering stock sales with 144 stock or other restricted instruments. Ultimately, it'll be on him if he is, but the SEC loves to tie a brokerage in with that shit, especially if a bent transfer agent rolls on the brokerage. If he's running these trades in a DvP account, you have a reason to be concerned. If he's running all of his buys and sells through you, then you're probably okay.

Ultimately, it's about making gross. Don't look a gift horse in the mouth.

Eddie, I assume you know that most even half way reputable firms are already doing electronic surveillance on accounts looking for unusual trading patterns and anything with penny stocks is going to be raising flags with compliance to begin with. Given the fact that the poster is asking about this online and thinks there is something wrong, probably means that there is. No retail client is winning on every trade...I think you would agree with that. I guarantee you the OP has told someone about at least one of these trades, maybe a friend, maybe family, probably another client. If the original client gets caught, they will all get caught if any of them acted on it. People send emails with this info in it now and is how they get caught...it is insanity. If the authorities are building a case against the client, they are performing surveillance on the client and his brokers right now or can go back and get electronic files retroactively. They will look to the post he made here on WSO as part of their evidence that he knew or should have known that something was wrong and should have reported it, so that was pretty dumb to ask in a public forum.

Not to mention the fact that most retail brokers mark unsolicited on almost every trade now because they think it protects them from stuff like this.

Look, I hope the client just had a few lucky trades in a row or maybe he's just a penny stock badass like Tim Sykes. I wouldn't be holding my breath. I would go to compliance right now.

 

I understand that I need to report fraud, but......I am only speculating becuz hes always only buying pennies and in large amount, I know I have to report frauds, but lets face it.....how can I report some one for being good at trading pennies(pump&dump is just speculation, inevitable...)?

I will try to go to my compliance guy of course, but just curious .....

 

unsolicited trades firm allows u to trade penny stocks no prior warnings from compliance...

I think you're in the clear for now... until your not.

Talk to ur client, ask him how he gets his idea flow, question how hes so liquid, get info by being persobable and friendly.

Run it by your office manager, if they're friendly, and not dicks.

 

Speaking AS a compliance guy, I would say go to compliance now.

We've looked into suspicious trading activity on unsolicited orders before. If you suspect fraud, you need to say something so that it can be looked into, otherwise you may very well get in trouble yourself. "I didn't know" won't be a solid defense when it turns out the guy is running a 90%+ profit rate on OTC pump-and-dump scams.

He may be a "sophisticated investor" based on his net worth, but you are the industry professional. You have an obligation to report anything that may be damaging to the industry and other investors.

 
SirPoopsaLot:
You need to notify compliance right now. Don't wait until Monday.
And by the way, if this guy is doing illegal trades, the authorities will be doing electronic surveillance of the client and all of his brokers, possibly including the post you put here on WSO. You can not claim ignorance that you had no idea when you stated that you have suspicions about the trade...that wouldn't work well in court. Go to compliance.
 

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