A federally regulated brokerage firm spent four straight years running no anti-money laundering checks whatsoever, falsified its own financial records, pushed high-risk investments on everyday customers without a single written protection in place, and the entire punishment amounted to $55,000 (roughly the annual salary of a full-time retail worker) — less than a rounding error on Wall Street.

The Playbook of Corporate Misconduct at Liberty Partners Financial Services

Liberty Partners Financial Services, LLC has been a FINRA member since 2004. The firm operates out of Raleigh, North Carolina, maintains seven branch offices, and employs approximately 40 registered representatives. It is the kind of mid-sized brokerage that handles real people’s real money — retirement savings, college funds, the financial futures of working families.

Between 2020 and 2023, that firm accumulated four distinct categories of regulatory violation, each one representing a deliberate choice to skip the rules rather than follow them. FINRA’s investigation did not uncover a single accident or isolated mistake. It uncovered a system built on indifference.

This is not ancient history. The violations ran through December 2023. The settlement was signed March 17, 2025. The firm’s president, Daniel Shanahan, signed the paperwork.

Four Ways They Failed You

Violation One: Selling Dangerous Products With Zero Safeguards

From July 2020 through December 2023, Liberty’s brokers recommended “non-traditional ETPs” to retail customers. These are complex financial instruments — leveraged and inverse exchange-traded products — that are specifically designed to deliver returns over a single trading day. Held longer than that, their performance degrades in ways that can blindside even experienced investors.

FINRA had been warning firms about exactly this risk since 2009. A 2009 regulatory notice and a 2012 follow-up both put the industry on notice: these products are generally not suitable for retail customers holding them longer than one trading session. Liberty knew about these warnings. They simply chose to ignore them.

During this entire three-and-a-half-year period, Liberty maintained no written policies specific to non-traditional ETPs, no restrictions on who could be sold them, no approval process, no alerts, and no exception reports. There was no supervisory system at all. Brokers were free to sell these volatile instruments to anyone, with no guardrails protecting the customer.

Violation Two: Cooking the Books for Nearly a Year

Between December 2022 and September 2023, Liberty deliberately misclassified certain fees it was supposed to pass through to its own representatives. By booking those fees as the firm’s own assets rather than money it owed, Liberty inflated its net capital position by between $17,783 and $34,070 (enough to cover several months of groceries for a working family). That inflation was then reported to regulators across ten separate FOCUS reports — the official financial filings that regulators rely on to monitor whether a firm is operating legally.

Every one of those ten reports was false. The firm reported a financial health it did not have. Regulators and counterparties making decisions based on those filings were operating on fabricated data.

The consequence of this bookkeeping fraud was that Liberty spent five business days in August 2023 conducting a securities business while technically insolvent — below the minimum net capital required by federal law to legally operate. The net capital deficiency during that period was $16,664 (roughly what a minimum wage worker earns in six months of full-time work). Liberty conducted business every single one of those five days.

Violation Three: Four Years of Blind Eyes on Money Laundering

Federal law requires brokerage firms to run an independent test of their anti-money laundering (AML) compliance program every single calendar year. This is a basic check: an outside party, or qualified internal staff, reviews the program to make sure it actually works and that financial crimes are being caught. Liberty skipped this test entirely for four consecutive years — 2020, 2021, 2022, and 2023.

Even more alarming: during this same period, Liberty maintained no written AML policies or procedures regarding the testing requirement at all. The firm did not forget to run the test. The firm had no process for running it, no documentation requiring it, and apparently no one raising a hand to ask why it was being skipped.

Anti-money laundering programs exist because the financial system is one of the primary channels through which criminal proceeds from drug trafficking, human trafficking, fraud, and terrorism get laundered into legitimate assets. A firm that does not test its AML program is a firm that cannot know whether it is being used as a pipeline for those crimes.

The Non-Financial Ledger

What the Fine Doesn’t Cover

The $55,000 fine (roughly the annual salary of a full-time retail worker) is the number regulators settled on. It is not a measure of harm. It is a measure of what the company was willing to pay to make the investigation go away. The actual cost of Liberty’s conduct was paid by ordinary people whose names do not appear anywhere in this document.

Consider the retail customer who was recommended a non-traditional ETP — a leveraged or inverse product — by a Liberty broker, held it longer than one trading session because no one told them they shouldn’t, and watched their position erode. FINRA explicitly warns that these products “can differ significantly from the performance (or inverse of the performance) of their underlying index or benchmark” over periods longer than a single day. That is not a hypothetical risk. That is a mathematical certainty built into the product’s structure. Liberty’s brokers were selling a product with a known, documented, catastrophic failure mode for long-term retail holders, with no policy in place requiring them to even understand that risk, let alone communicate it.

The Regulation Best Interest rule, which took effect June 30, 2020, exists for one reason: because brokers, for decades, were allowed to recommend investments that were good for the broker’s commission and bad for the customer. Reg BI was supposed to close that gap by requiring brokers to act in the customer’s best interest. Liberty violated Reg BI’s Care Obligation for the entire period it was in effect during this investigation. Every customer who received a non-traditional ETP recommendation from a Liberty broker between July 2020 and December 2023 received that recommendation in an environment where the firm had deliberately built no system to ensure it was appropriate for them.

The books-and-records violation carries its own quiet indignity. When a brokerage firm overstates its net capital — the financial cushion that exists to protect customers if the firm goes under — and then files that false number with regulators ten times, it is corrupting the very oversight system designed to protect investors. Regulators who believed Liberty’s FOCUS reports were making enforcement and risk decisions based on a lie. The integrity of the entire monitoring system depends on accurate reporting. Liberty spent nine months poisoning that well.

The five days Liberty conducted a securities business while technically insolvent are perhaps the most direct expression of the firm’s priorities. Federal law does not make this ambiguous: FINRA Rule 4110(b)(1) requires a firm to suspend all business operations when it falls below net capital requirements. Liberty kept its doors open. Five days of trades, five days of commissions, five days of business conducted on a foundation the law said did not legally exist. The customers on the other side of those transactions had no way of knowing.

Legal Receipts

What the Document Actually Says, Word for Word

“Between July 2020 and December 2023, the firm had no written policies or procedures specific to non-traditional ETPs. The firm did not maintain any restrictions or approval process with respect to recommendations of non-traditional ETPs, and did not use any alerts, exception reports, or other supervisory tools with respect to these products.”

— FINRA AWC No. 2023077098101, Facts and Violative Conduct

“Liberty’s misclassification of the fees described above resulted in the firm being net capital deficient by $16,664 from July 31, 2023, through August 7, 2023. The firm conducted a securities business on five days during that period.”

— FINRA AWC No. 2023077098101, Facts and Violative Conduct

“Between 2020 and 2023, however, Liberty failed to conduct any independent testing of its AML compliance program. In addition, during the same period, the firm failed to maintain any written AML policies or procedures regarding the testing requirement under FINRA Rule 3310(c).”

— FINRA AWC No. 2023077098101, Facts and Violative Conduct

“Broker-dealers recommending such products should understand that inverse and leveraged exchange-traded products that are reset daily may not be suitable for, and as a consequence also not in the best interest of, retail customers who plan to hold them for longer than one trading session, particularly in volatile markets.”

— SEC, cited in FINRA AWC No. 2023077098101 (emphasis added)

“[Non-traditional ETPs] typically are not suitable for retail investors who plan to hold them for more than one trading session.”

— FINRA Regulatory Notice 09-31 (2009), cited in FINRA AWC No. 2023077098101

Societal Impact Mapping

Public Health: The Financial Stress Pipeline

Financial harm and physical health are not separate issues. Decades of public health research establish a direct link between financial stress and measurable health outcomes: elevated cortisol, cardiovascular disease, depression, anxiety disorders, and reduced life expectancy. When a brokerage firm systematically fails to protect retail customers from unsuitable investment recommendations for three and a half years, the harm it causes does not stay in a brokerage account. It follows people home.

The customers targeted by Liberty’s unregulated non-traditional ETP recommendations were, by definition, retail investors — everyday people. The SEC’s own Reg BI framework specifically distinguishes retail customers from institutional ones precisely because retail investors are more financially vulnerable, less sophisticated in evaluating complex instruments, and have fewer resources to absorb losses. Liberty’s failure to maintain any system for ensuring these products were appropriate for the specific customers receiving them meant the most vulnerable investors in its book were the least protected.

For anyone who held a leveraged or inverse ETP longer than one trading session — believing, reasonably, that their broker had their best interest in mind — the mathematical decay built into those products represented real money lost. Real rent not paid. Real retirements delayed. Real stress carried in real bodies.

Economic Inequality: The Compliance Tax

Compliance rules in financial services exist as a wealth-protection mechanism for people who cannot afford to lose. The ultra-wealthy self-insure. They hire private advisors, retain lawyers, diversify across asset classes, and absorb investment losses as line items. The retail investor going to a mid-sized brokerage in Raleigh, North Carolina does not have those options. Their protection is the regulatory system — FINRA rules, Reg BI, net capital requirements, AML programs. That system is only as good as the firms that follow it.

When Liberty overstated its net capital for nine months and filed ten false FOCUS reports, it degraded the reliability of the monitoring system that is supposed to flag when a firm is in financial distress before customers get hurt. Net capital requirements are not abstract accounting exercises. They are the money a firm is supposed to have on hand if things go wrong. A firm that falsely reports it has more cushion than it does is a firm that the regulator incorrectly believes can weather a storm. Retail customers — the last in line when a firm fails — bear the consequences of that miscalculation.

The $55,000 fine (roughly the annual salary of a full-time retail worker) represents a fraction of the economic advantage Liberty gained by skipping compliance infrastructure. Building and maintaining proper supervisory policies, running annual AML testing, and maintaining accurate books costs real money. Liberty did not spend that money for years. The fine charged at the end is smaller than what proper compliance would have cost. That math tells you everything you need to know about whether fines at this level deter anything.

The “Cost of a Life” Metric

The $55,000 fine (roughly the annual salary of a full-time retail worker, or about 8 months of median household rent) is the entirety of the financial consequence Liberty faced. There is no disgorgement of profits. There is no compensation fund for affected customers. There is no requirement to identify or notify the retail customers who received unsuitable investment recommendations.

The firm’s president signed the settlement. The firm will continue operating. The violations ran for years. The consequence took weeks to pay.

What Now?

Who Is Accountable and Where to Apply Pressure

The settlement names Daniel Shanahan as the President of Liberty Partners Financial Services, LLC, the signatory on the AWC. The firm’s counsel is Richard Nummi, Esq., Nummi & Associates, PA, St. Petersburg, FL.

Regulatory Watchlist

• FINRA (Financial Industry Regulatory Authority) — the primary regulator here; search Liberty Partners on BrokerCheck at finra.org/brokercheck for the full public record.
• SEC (Securities and Exchange Commission) — Reg BI enforcement and broker-dealer oversight; file investor complaints at sec.gov/tcr.
• FinCEN (Financial Crimes Enforcement Network) — the Treasury bureau responsible for AML compliance standards; four years of zero AML testing falls in their jurisdiction.
• CFPB (Consumer Financial Protection Bureau) — for retail investor consumer harm documentation and policy advocacy.
• State Securities Regulators (North Carolina Department of the Secretary of State, Securities Division) — Liberty operates in North Carolina and seven branch states.

Take It Further

If you were a Liberty Partners customer between 2020 and 2023 and were recommended leveraged or inverse ETPs, contact a securities attorney about your options. FINRA’s BrokerCheck is free and public — look up every broker who has ever handled your money. Support local mutual aid networks that provide financial literacy education for working-class communities. Demand that your elected representatives push for mandatory restitution funds tied to FINRA enforcement actions, so fines go to harmed investors rather than into a general fund. And keep watching this firm — this AWC becomes part of its permanent disciplinary record and will be considered in any future enforcement action.