Charles Frederik Lek, Broker with Lek Securities Corporation, Named in FINRA Complaint Alleging Failure to Supervise

INVESTORS: Lek Securities Corporation broker Charles Frederik Lek was named in a FINRA complaint alleging failure to comply with settlement and failure to supervise.

Charles Frederik Lek (CRD: 4672129) is registered as a broker with Lek Securities Corporation, where he’s been employed since 2008. Lek was briefly registered as a broker with Peter R. Mack & Co., in 2018.

Lek has five disclosures on his BrokerCheck report. Four customer disputes were denied and one was closed with no action taken.

September 2022 Regulatory Judgment

Status: Pending

Initiated By: FINRA

Allegations: The firm and Lek were named respondents in a FINRA complaint alleging that they failed to comply with an Order Accepting Offer of Settlement with FINRA by violating a business line suspension. The complaint alleges the firm violated the business line suspension by accepting and liquidating deposits of low-priced securities while the business line suspension was in effect. Lek, on behalf of the firm, purported to lift the business line suspension, without having certified to FINRA that the firm had implemented all of the recommendations in the independent consultant’s initial report. Lek approved and facilitated the acceptance of all the violative deposits. Lek then submitted a certification to FINRA that the firm had implemented all of the recommendations in the initial report when, in fact, it had not implemented all of the recommendations as of that date. Further, Lek caused the firm to accept deposits and liquidate low-priced securities in violation of the business line suspension by, among other things, failing to timely notify firm personnel and customers of the commencement of the business line suspension, providing false guidance to the firm regarding the applicability of the business line suspension to recently received deposits, failing to take steps to prevent the firm from accepting violative deposits and liquidations, and prematurely purporting to lift the business line suspension. The complaint also alleges that the firm and Lek failed to comply with the order by failing to implement the independent consultant’s recommendations. Lek, on behalf of the firm, failed to adopt and implement 18 of the 98 recommendations, in whole or in part. The complaint further alleges that the firm and Lek made false certifications and representations to FINRA. Lek was aware that his certification representing that the firm had complied with the business line suspension was false because he knew the firm had accepted deposits of low-priced securities and permitted liquidations of low-priced securities that did not fall within the two limited exceptions in the Order. Further, Lek, on behalf of the firm and knowing that his representations were false, submitted a certification and implementation report to FINRA representing that the firm had implemented all of the recommendations in the initial report. In addition, the complaint alleges that, with respect to microcap securities, the firm, under Lek’s direction, failed to implement AML policies, procedures, and internal controls reasonably expected to detect and cause the reporting of suspicious transactions and reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations promulgated thereunder by the Department of the Treasury. Lek was responsible for AML compliance related to the firm’s microcap customers, microcap deposits, and microcap sales through the firm. Further, when the independent consultant recommended that the firm update its WSPs to include new red flags from the latest regulatory guidance notice, the firm largely declined to do so. The firm also had inexperienced and unqualified compliance staff, did not have an AML compliance officer for 11 months, and excluded its then chief compliance officer from effectively reviewing the firm’s microcap securities business. Moreover, the complaint alleges that the firm, through Lek, failed to establish and maintain a supervisory system reasonably designed to supervise the firm’s microcap securities business, and otherwise failed to supervise this business. The firm’s microcap customer activity regularly implicated red flags of potentially violative behavior set forth in regulatory guidance, but the firm and Lek failed to detect and reasonably investigate such red flags. To the extent that the firm’s exception reports identified potentially suspicious activity, the firm and Lek failed to reasonably investigate that activity and failed to adequately document any investigation they undertook.

March 2022 Regulatory Judgment

Status: On Appeal

Initated By: The Depository Trust & Clearing Corporation and The National Securities Clearing Corporation

Allegations: A Hearing Panel of the Depository Trust & Clearing Corporation (“DTCC”) issued a decision on March 10, 2022 (the “Hearing Panel Decision”) in which it affirmed certain determinations and sanction issued by the National Securities Clearing Corporation (“NSCC”) and the Depository Trust Company (“DTC”). The Hearing Panel Decision stated, among other things, that Charles Lek, the CEO of LSC, indicated in an affirmation submitted to the Hearing Panel that information provided by LSC had “answered FINRA’s questions about the Lek Holding Note Program and alleviated any concerns it had.” The Hearing Panel Decision also stated the following: “Mr. Lek further testified in his Affirmation that in a telephone call Brian Kowalski, FINRA’s Senior Director of Risk Monitoring, ‘acknowledged that FINRA now believes that the Lek Holdings Note Program adequately addresses any liquidity risks associated with NSCC funding requirements.’ These statements were knowingly false. DTCC submitted an Affidavit from Mr. Kowalski in which Mr. Kowalski testified that Mr. Lek’s statements regarding what FINRA had told LSC about the Lek Holdings Note Program were incorrect and that FINRA ‘continues to have concerns on the subject of whether the Lek Holding Promissory Note Program adequately addresses liquidity risks associated with NSCC funding requirements.'” (Citations omitted.) Mr. Lek disputes these statements by the Hearing Panel. LSC has appealed the Hearing Panel Decision to the SEC and requested the SEC to issue a stay of the actions by the NSCC and DTC pending the appeal. The SEC denied the stay application on May 31, 2022, and the appeal to the SEC is currently pending

Resolution: Decision

Sanctions: N/A

March 2021 Customer Dispute

Status: Pending

Allegations: The customer is alleging that the losses it suffered were the result of the restrictions placed upon it by the Firm in its trading and its access to margin during the market volatility that occurred at the onset of the COVID 19 pandemic in February and March 2020.

Damage Amount Requested: $24,000,000.00

November 2020 Customer Dispute

Status: Pending

Allegations: The customer is suing to recover monies withheld by the Firm to pay for the customer’s unpaid bills for the usage of exchange data. Activity dates are 07/2020 to 11/2020.

Damage Amount Requested: $244,370.01

March 2019 Customer Dispute

Status: Settled

Allegations: An attorney for [REDACTED] filed a FINRA arbitration against Lek Securities Corp, Lek Holdings Ltd, Samuel Lek, and Charles Lek, alleging damages of at least $500,000.00 due to frozen funds; excessive Fees; misrepresentation and breach of contract. [REDACTED] is not a customer of Lek Securities Corp. The FINRA Office of Dispute Resolution Arbitration Number is 19-00800.

Damage Amount Requested: $500,000.00

Settlement Amount: $350,000.00

Broker Comment: This case involved a disagreement over the indemnity provision of the agreement between the customer and his broker-dealer LEK UK and the business services agreement between LEK US and LEK UK.

The Sonn Law Group is currently investigating allegations surrounding Charles Frederik Lek. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.