FINRA Complaint Raises Questions About Boustead Securities, Sutter Securities, and Supervisory Oversight

A disciplinary complaint filed by the Financial Industry Regulatory Authority (FINRA) has raised significant regulatory concerns involving Boustead Securities, LLC, Sutter Securities Incorporated, and former executive Keith Charles Moore (CRD #5191450). The complaint focuses on alleged conduct from 2021 to 2023 and centers on supervision, anti-money laundering (AML) compliance, and oversight of investment banking and underwriting activities.

According to FINRA, the firms participated as underwriters or selling group members in approximately 30 public securities offerings during this period. Many of these offerings involved small-cap, micro-cap, or nano-cap companies with primary operations located outside the United States, particularly in China. FINRA has explicitly identified such offerings as presenting heightened regulatory and investor-protection risks.

High-Risk IPOs and Offerings

The firms served as underwriters for numerous offerings that fit the high-risk profile regulators described. Verifiable examples of companies underwritten by Boustead or Sutter during or around this period include:

• Jiuzi Holdings, Inc. (JZXN): A China-based electric vehicle retailer.
• China Liberal Education Holdings (CLEU): A China-based educational services provider.
• Wunong Net Technology (WNW): A China-based online food retailer.
• Esports Technologies, Inc. (EBET): A technology company focused on competitive gaming.
• Flora Growth Corp. (FLGC): A cannabis-focused company with primary operations in Colombia.
• LRE & Companies (LRE): A real estate development firm.
• Boustead Wavefront Inc. (BOUW): A foreign private issuer holding company.

Key Issues Highlighted in the Complaint

The FINRA complaint alleges that Boustead and Sutter failed to implement AML programs that were reasonably tailored to the risks of their businesses. Regulators assert that the firms did not adequately investigate red flags, including:

• Foreign Account Irregularities: Accounts opened for foreign issuer-referred customers without in-person or video interaction.
• Identity Overlap: Multiple accounts with nearly identical customer profiles.
• Financial Inconsistency: Investment activity that was inconsistent with a customer’s stated income, employment, or net worth.
• Aftermarket Manipulation: Potential coordinated or pre-arranged trading in certain IPOs once they hit the secondary market.

These deficiencies allegedly resulted in failures to determine whether Suspicious Activity Reports (SARs) should have been filed with federal authorities.

Supervisory and Recordkeeping Allegations

Beyond AML concerns, the complaint outlines failures in basic firm supervision. FINRA claims the firms lacked systems to detect manipulative trading or ensure compliance with Regulation M, which governs conduct during securities distributions.

Boustead is also alleged to have failed to retain business-related communications conducted via messaging platforms such as WhatsApp and WeChat, despite management’s knowledge that these apps were being used for firm business. Furthermore, FINRA alleges that Boustead failed to disclose certain underwriting compensation associated with a 2021 public offering.

Role of Keith Charles Moore

Keith Charles Moore served as CEO and Anti-Money Laundering Compliance Officer for both firms during the period in question. FINRA alleges that Moore failed to implement or enforce supervisory systems despite awareness of multiple compliance red flags. While Moore is no longer registered in the industry as of early 2024, FINRA maintains jurisdiction over him to pursue sanctions and disciplinary findings.

Why This Matters for Investors

FINRA enforcement actions provide a window into regulatory priorities, specifically regarding “gatekeeper” liability in small-cap IPOs involving foreign issuers. Allegations involving inadequate supervision or aftermarket trading oversight can be especially significant for investors who experienced sudden, unexpected losses or observed unusual price volatility in these specific stocks.

It is important to emphasize that a FINRA complaint contains allegations, not final findings. However, these proceedings are vital for investors seeking to understand the regulatory risks associated with specific firms and their offerings.

Investor Awareness and Potential Next Steps

Investors who participated in IPOs or aftermarket trading through Boustead Securities or Sutter Securities may have questions about how these compliance failures impacted their portfolios. Depending on the specific facts, some investors may pursue recovery options through FINRA arbitration, a process designed to resolve disputes between investors and brokerage firms arising from supervisory negligence or unsuitable investment recommendations.