USA HERALD – Federal regulators have fined Cetera Advisors LLC and its affiliated firms $1.1 million after determining that the company failed for years to properly monitor suspicious stock transactions, allowing warning signs to go undetected across multiple accounts.
According to a settlement announced by the Financial Industry Regulatory Authority, Cetera’s advisory, wealth services, and investment divisions operated with inadequate supervisory controls and weak anti-money laundering safeguards between 2019 and 2021. Regulators said those failures allowed customers to rapidly sell large volumes of low-priced securities without meaningful review.
FINRA found that Cetera’s internal systems did not consistently require representatives to complete mandatory questionnaires designed to flag risks associated with penny stock deposits. As a result, customers were often able to liquidate shares before compliance teams received or reviewed the required information.
In several instances, FINRA said this lack of oversight allowed millions of shares of low-priced stock to be deposited, sold, and wired out of accounts without sufficient investigation into potential red flags.
One example cited by regulators involved a customer who opened an account in mid-2020, deposited tens of thousands of low-priced shares shortly afterward, and began selling them within days. Public filings showed the individual had been hired to promote the issuing company, and the shares were acquired just before the account was opened. FINRA said those factors should have triggered enhanced scrutiny.
Regulators also said Cetera’s policies prior to late 2019 failed to provide clear guidance on identifying suspicious activity involving low-priced securities. Even after updates were made, FINRA concluded the firm’s anti-money laundering program still lacked risk-based procedures necessary to detect and report questionable transactions.
In addition, FINRA found that Cetera relied on manually entered data in consolidated client reports without verifying its accuracy, further weakening its ability to identify unusual trading behavior.
Without admitting or denying the findings, Cetera agreed to pay the fine, accept a formal censure, and implement corrective measures to strengthen its supervisory and compliance systems.
In a statement, a company spokesperson said the deficiencies identified by regulators have already been addressed and emphasized that Cetera continues to invest in compliance controls aimed at protecting clients and supporting advisers.
FINRA declined to comment beyond the terms of the settlement.
The enforcement action highlights ongoing regulatory concerns around penny stock activity and the responsibilities brokerage firms face in monitoring transactions that can expose investors and markets to heightened risk.
