Securities Industry Commentator by Bill Singer Esq

January 5, 2018

Justice Department Issues Memo on Marijuana Enforcement (DOJ Press Release 18-8) READ the FULL TEXT Memorandum.
As set forth in part in the DOJ Press Release, there will purportedly be a:

[R]eturn to the rule of law and the rescission of previous guidance documents. Since the passage of the Controlled Substances Act (CSA) in 1970, Congress has generally prohibited the cultivation, distribution, and possession of marijuana. 

In the memorandum, Attorney General Jeff Sessions directs all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities. This return to the rule of law is also a return of trust and local control to federal prosecutors who know where and how to deploy Justice Department resources most effectively to reduce violent crime, stem the tide of the drug crisis, and dismantle criminal gangs.

$4 Billion Crypto-Promoter Offering Fraudulent Investment Programs (Texas State Securities Board Press Release) The Texas Securities Commissioner entered an Emergency Cease and Desist Order to halt the multiple investment programs operated by England-based BitConnect that claims a market share of $4.1 billion for its cryptocurrency coins. READ the FULL TEXT TSSB Emergency Order in England.

FINRA's $10,000 Expungement Price-Tag To Clear A Victim's Name ( Blog)

There's a lot of anti-consumer misconduct on Wall Street that's tolerated and even promoted as a way to get around rules and to make a quicker buck. All of which prompts losses in customers' accounts, which then creates angry customers, who file complaints. No . . . I ain't gonna pretend that many, if not most, customer complaints aren't justified. On the other hand, there are many instances when a stockbroker is victimized by unwarranted customer complaints. Unfortunately, Wall Street has constructed an unfair system by which men and women who seek to clear their names are forced to pony up a sizable bankroll just to get the process going and then have to invest further time and money to see it to fruition. 

In today's Blog we focus on a stockbroker who did nothing wrong, should have his industry record expunged of what is independently determined to be a false customer complaint, but is daunted by the price-tag and the delays inherent in that endeavor. Equally troubling, we consider how the Financial Industry Regulatory Authority seems to have developed a lucrative business predicated upon the misfortunes of its associated persons. READ

Former Transition Management Executive Agrees to Securities Industry Bar and is Ordered to Pay Over $975,000 to Settle Fraud Charges (SEC Litigation Release No. 24023) In Securities and Exchange Commission v. Khaled "Kal" Bassily (United States District Court for the Southern District of New York, 16-CV-2733 / Apr. 12, 2016), the SEC alleged that  Khaled Bassily, former head of ConvergEx Group's transition management business,  defraud charities, religious organizations, and retirement funds by charging them substantially higher amounts than disclosed for the execution of trading orders.Without admitting or denying the SEC's allegations, Bassily consented to the entry of a final judgment that ordered him to pay a total of $988,414 in disgorgement plus interest and a civil penalty and permanently enjoined him/ Bassily also consented to the entry of an SEC Bar from the securities industry. This settlement is in addition to the SEC's settlement with three ConvergEx Group subsidiaries that agreed to pay over $107 million and admit wrongdoing. Two former employees and a former executive of another ConvergEx Group subsidiary also settled. The SEC's August 2014 Complaint against Anthony G. Blumberg, a former executive of a ConvergEx Group subsidiary, is pending in federal court.  Also see:

Formerly registered investment adviser, LKL Investment Counsel LLC and its sole principal, Mark H. Love agreed to settle Investment Advisers Act charges alleging misrepresentations in Forms ADV, failure to produce documents to SEC examination staff, and various compliance-related deficiencies. As set forth in part in the SEC Press Release:

[I]n 2009, Love began recommending that certain LKL advisory clients invest in private funds in which he held managerial interests and from which he stood to receive fees and a share of investment profits. LKL's advisory clients who invested in the private funds knew of Love's involvement with the funds, but from 2010 to 2015, LKL's Forms ADV falsely stated that Love had no outside financial industry activities or affiliations and no interests in client transactions. During an early 2016 SEC examination of LKL, Love made these same misrepresentations to Commission examination staff and failed to produce requested documents regarding certain of his private funds.

The SEC's order also finds that in its March 2016 Forms ADV annual updating amendment, LKL corrected its previously inflated assets under management figure, reducing it by nearly $30 million, and expressly acknowledged that this was a material change. This required LKL to deliver its revised Form ADV Part 2A brochure, or a summary of material changes, to its clients. LKL failed to do this. 

Without admitting or denying the findings, LKL and Love each consented to the entry of the SEC's Order, which found that they willfully violated the Investment Advisers Act of 1940 and that Love willfully aided and abetted and caused LKL's violations of those provisions. LKL and Love consented to the entry of cease-and-desist orders and censures, civil penalties of $100,000 for LKL and $50,000 for Love, as well as certain undertakings. Love also agreed to limitations and prohibitions that prevent him from acting in a compliance capacity. READ FULL TEXT SEC Order.