Initiated By
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Allegations
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Pierre Economacos ("Economacos" or "Respondent"). The Commission finds that this matter arises from the failure of Pierre Economacos, a registered representative at a registered broker-dealer (the "Firm"), to report to the Firm's anti-money laundering ("AML") group suspicious and unusual transactions in a brokerage account of his long-time customer (the "Customer") that surrounded the announcement of the acquisition of the company where the Customer's close family member was an executive (the "Executive"). Between 2011 and 2021, Economacos was the registered representative for a brokerage account held by the Customer and brokerage accounts held by the Executive. From 2016 to 2021, these accounts were held at the Firm. In 2019, Economacos complied with a request from the Customer to make a $50,000 wire transfer to the Customer's close relative (the "Relative"), who was Economacos's friend but not a Firm customer. The Relative was also a close family member of the Executive. The wire transfer was made from the Customer's Firm account to the Relative's brokerage account at another firm (the "Initial Wire") purportedly because the Relative needed the funds for a real estate transaction. Three days after the Initial Wire, the company where the Executive worked (the "Company") announced that it would be acquired (the "Announcement Date"), and its stock price increased by approximately 30%. Economacos knew the Executive worked at the Company and Economacos learned of the acquisition on the Announcement Date. One day after the Announcement Date, the Relative wired $50,000 (an amount equal to the Initial Wire) back to the Customer's Firm account from the Relative's brokerage account. The next day, the Relative sent another $50,000 wire from the Relative's brokerage account to the Customer's Firm account. Five days later, the Relative sent two additional wires each in the amount of $90,000 from brokerage accounts the Relative controlled in the names of two immediate family members. These wire transactions, which closely surrounded the acquisition announcement of the company where the Executive worked, were unusual in the context of the Customer's account history for a number of reasons. For example, while the Customer had previously sent wire transfers to the Relative, the Customer had never sent any money to a brokerage account owned by the Relative, had no history of incoming wires since the accounts were opened at the Firm, and had never received any money from the Relative's immediate family members who were students at the time of the wires. Economacos understood and agreed to abide by the Firm's AML and ethics policies, which emphasized that the Firm's registered representatives are the "first line of defense" with respect to detecting and reporting suspicious activity in customer accounts. These policies required registered representatives, including Economacos, to escalate "red flags" or unusual account activity to the Firm's AML group so that AML investigators could review the activity to determine whether the Firm should report the transactions to the appropriate authorities, such as by filing a Suspicious Activity Report ("SAR"). Nevertheless, Economacos failed to inform the Firm's AML group of the above wire transactions surrounding the acquisition announcement, which caused the Firm to fail to timely file a SAR regarding the activity in violation of Exchange Act Section 17(a) and Rule 17a-8 thereunder.
Resolution
Order
Sanctions
Cease and Desist
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$20,000.00