FINRA Censures Moody Capital Solutions, Fines Firm $50,000 for AML Lapses

Moody Capital Solutions Inc. accepted a censure and $50,000 fine from the Financial Industry Regulatory Authority after the regulator found the firm failed to maintain adequate supervisory systems and an effective anti-money laundering program spanning more than five years, according to a letter of acceptance, waiver, and consent.

The Atlanta-based broker-dealer, which operates as a placement agent for private placements to investment funds and accredited investors, did not admit or deny the findings.

FINRA’s examination identified four distinct compliance failures at the six-registered-representative firm. From January 2020 to May 2023, the firm’s written supervisory procedures, or WSPs, governing outside business activities did not include guidance on how to evaluate whether a proposed outside business activity, or OBA, would conflict with a registered representative’s responsibilities to the firm or its customers, or be viewed by customers as part of the firm’s business. The WSPs also failed to address when the firm should impose conditions or limitations on OBAs, or whether a disclosed activity should be treated as an outside securities activity subject to FINRA Rule 3280 – and did not require documentation of those evaluations.

The procedural gaps had practical consequences. Between January 2020 and December 2022, the firm did not evaluate at least 23 OBAs disclosed by registered representatives, as required by FINRA Rule 3270.01. The firm updated its OBA supervisory procedures in May 2023.

Moody Capital’s supervision of outside securities accounts had parallel deficiencies. The firm’s WSPs required associated persons to disclose outside accounts, and the firm to obtain duplicate statements. However, it provided no guidance on how to review those statements for potential securities violations, and the firm did not maintain a system to verify it had received or reviewed them. Of a sample of 19 accounts reviewed by FINRA covering the January 2021 to December 2022 period, the firm had no account statements for six and incomplete statements for 12. The firm updated those WSPs in May 2023 as well.

The AML failures continued, according to FINRA. From January 2020 to June 2023, the firm’s AML program did not include reasonably designed procedures to verify customer identity or identify the beneficial owners of legal entity customers, FINRA said. Between August 2021 and August 2022, eight legal entities invested through the firm in 20 private offerings where Moody Capital served as placement agent. The firm updated its AML policies and procedures in June 2023.

The most extensive failure was the firm’s AML testing record. FINRA Rule 3310(c) requires annual independent testing of AML compliance programs for firms that execute customer transactions. Moody Capital conducted no independent AML testing for any calendar year from 2020 through the present.

As part of the settlement, the firm agreed to an undertaking requiring a senior registered principal to certify within 90 days that the firm has completed independent AML testing, with supporting documentation submitted to FINRA’s enforcement department.

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