The SEC instituted administrative proceedings alleging that Windsor Street Capital, a brokerage firm formerly named "Meyers Associates L.P.," and its former anti-money laundering ("AML") officer John D. Telfer facilitated the unregistered sale of "penny stock" shares and failed to file Suspicious Activity Reports ("SARs") for $24.8 million in suspicious transactions. In a related matter, the SEC filed a civil case in federal court against Meyers Associates' customers charging them with conducting a fraudulent penny stock scheme, in part by providing false information to Meyers Associates.
The SEC Order instituting proceedings alleges that Meyers Associates facilitated the unregistered sale of "hundreds of millions of penny stock shares" without ensuring adequate due diligence to ensure Securities Act Section 5 compliance. The SEC Order charges that Meyers Associates failed to identify numerous red flags associated with the penny stock transactions and failed to file required SARs with the Financial Crimes Enforcement Network. The SEC Order asserted that, as AML officer for Meyers Associates, Mr. Telfer was "personally responsible" for monitoring the firm's SAR reporting compliance, and therefore, "aided and abetted, and caused" the firm's violations.
The SEC Complaint against Meyers Associates' customers alleges that they obtained "the outstanding convertible debt of several public shell companies" and then had chief executive officers of Issuers provide them with unregistered stock. The Complaint also alleges that these customers "made numerous false public statements" about the business of the Issuers that were intended to boost the Issuers' stock price, after which they allegedly illegally sold the Issuers' unregistered stock. The Complaint also charges that they "knowingly made numerous material false statements to their brokerage firms to convince them that the stock could be legally sold pursuant to a registration exemption."
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