Red Bank investment firm fined for failing to follow investor protection rules

New Jersey Attorney General Jennifer Davenport announced that a Monmouth County brokerage firm will pay $375,000 and change its internal practices after state investigators found the company failed to follow rules designed to protect investors and prevent financial crimes.

The firm, Network 1 Financial Securities, Inc., which is based in Red Bank, reached an agreement with the New Jersey Bureau of Securities, part of the New Jersey Division of Consumer Affairs, to settle allegations that it broke the state’s securities law.

According to investigators, the company did not have strong enough systems in place to make sure it knew who its customers were, monitored trading activity, or properly reviewed some investment deals it helped sell.

“Investors work hard to build financial security and plan for an affordable future,” Davenport said. “We will protect investors’ money by making sure financial firms follow the law and maintain strong oversight.”

State regulators said Network 1 failed to properly supervise employees who opened and maintained several hundred customer accounts linked to people in mainland China and Hong Kong without collecting adequate identification documents. Rules require brokerage firms to verify customers’ identities to help prevent money laundering and other illegal activity.

Investigators also found that the firm did not confirm whether it had carefully reviewed three companies whose shares it was helping sell through private investment deals. In addition, the firm failed to flag or report suspicious trading that may have been intended to artificially boost the stock price of one of those companies.

The investigation also found gaps in the firm’s record-keeping. Regulators said Network 1 did not properly document whether it checked customers’ identities, reviewed suspicious trades, or completed due diligence on the companies involved in the investment deals.

Acting Division Director Jeremy E. Hollander said the state is committed to keeping financial markets fair so residents can invest with confidence.

The firm has faced regulatory action before. In March 2025, the Financial Industry Regulatory Authority fined Network 1 $400,000 and ordered it to hire an outside consultant to review its policies.

Under the new agreement with the state, the consultant must also report to regulators about whether the firm has improved its procedures.

Network 1 has also removed Michael Molinaro from his roles as chief compliance officer and anti-money-laundering compliance officer. The agreement prevents him from holding those types of supervisory or compliance positions at the firm in the future.