SEC Charges OTC Link LLC for Failing to Report Suspicious Activity

The Securities and Exchange Commission (SEC) has charged OTC Link LLC, a New York-based broker-dealer, with failing to file numerous Suspicious Activity Reports (SARs) over a period exceeding three years. The firm has agreed to pay $1.19 million to settle the charges.

OTC Link, whose primary business is operating three alternative trading system (ATS) platforms - OTC Link ATS, OTC Link ECN, and OTC Link NQB - is used daily by broker-dealers to execute or facilitate tens of thousands of transactions in over-the-counter securities.

According to the SEC's order, from March 2020 through May 2023, OTC Link failed to adopt or implement reasonably designed anti-money laundering policies and procedures. These procedures are crucial for surveilling transactions conducted through its ATSs for potential red flags of suspicious activity.

Broker-dealers like OTC Link are required to file SARs to help detect potential securities law and money-laundering violations. These reports play a vital role in providing regulators and law enforcement with important information about suspicious financial transactions.

Tejal D. Shah, Associate Regional Director of the SEC's New York Regional Office, emphasized the critical role of broker-dealers in the securities markets, stating, "Broker-dealers are critical gatekeepers to the securities markets and must diligently monitor for suspicious transactions. When firms like OTC Link fail to file SARs, they deprive regulators and law enforcement of important information about suspicious activity."

This case underscores the SEC's ongoing efforts to ensure compliance with anti-money laundering regulations and the importance of timely reporting of suspicious activities in the financial sector.

The settlement amount of $1.19 million reflects the seriousness of the charges and the duration of the compliance failure. It serves as a reminder to other broker-dealers of the potential consequences of neglecting their reporting obligations.

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