Securities Industry Commentator by Bill Singer Esq

January 8, 2018

FINRA ruling on broker's sports betting is 'moronic': lawyer (New York Post by Gregory Bresiger) The regulator is an ass. That's what a securities industry gadfly says of the recent enforcement of a Financial Industry Regulatory Authority (FINRA) rule against a broker who made sports handicapping picks.

Finra to Breakaway Brokers, Firms: Fight It Out (Barron's) Finra is apparently going to let brokerages and breakaway brokers fight it out over the issue of who owns the client. A spokeswoman for the regulator tells FinancialAdvisorIQ that it takes no position on the debate, and adds that Finra isn't involved in the broker protocol. Finra has arbitration rules to handle disputes, but no who-owns-the-customer rule.

Finra Refuses to Get Embroiled in 'Who-Owns (Financial Advisor IQ by Rita Raagas.De Ramos)
FINRA isn't going to intervene in the "who-owns-the-customer" debate that's resurfaced in the financial advisory industry because of the three high-profile exits of Morgan Stanley, UBS and Citigroup from the Protocol for Broker Recruiting.

Who Owns The Customer? Open Letter To FINRA Board From Bill Singer Esq ( Blog)
The Broker Protocol is a self-serving agreement negotiated among  employers/management and imposed without benefit of bargaining upon employees/labor and foisted upon equally disenfranchised public investors. There is no place for such fiat within self-regulation --- except, you know, the FINRA Board of Governors sat in silence as its large member firms sliced and diced control of public customers among themselves and then forced the convention upon their employees, smaller firms, and customers. Now, as that private agreement dissolves, the Board again gives silent assent. In resolving the "who owns the customer" issuer, FINR';s role is not a combatant but as the protector of the public investor and the industry. As members of the Board of Governors, your role is to act when your intervention is necessary, and this is such a moment in time. For once, assert your independence and protect the public and the industry. No one is asking you take sides. What everyone is asking you to do is your embrace the task of corporate governance and do your job. READ

SEC Charges California-Based Attorney with Securities Registration Violations (SEC Litigation Release No. 24024) In
Securities and Exchange Commission v. Owen H. Naccarato (United States District Court for the Southern District of Florida, 17-CV-24682-JLK), the SEC alleged that in September 2013, California-based attorney Owen H. Naccarato issued two Rule 144 opinion letters improperly concluding that microcap company Global Digital Solutions, Inc. ("Global Digital") was not a shell company and that certain shareholders were not its affiliates. In furtherance of said 144 opinion, Naccarato allegedly improperly instructed Global Digital's transfer agent to remove the restrictive legends from these shareholder certificates. Naccarato consented to the entry of Final Judgment without admitting or denying any of the SEC's allegations. The Final Judgment permanently enjoins Naccarato from violating Sections 5(a) and 5(c) of the Securities Act, and orders him to pay $1,000 in disgorgement, $127.77 in prejudgment interest, and a civil penalty of $10,000. Further, Naccaraot is prohibited for five years from directly or indirectly providing, or receiving compensation from the provision of, professional legal services to any person or entity in connection with the offer or sale of securities pursuant to, or claiming, an exemption under Section 4(a)(1) predicated on Securities Act Rule 144, or any other exemption from the registration provisions of the Securities Act, including, without limitation, participating in the preparation or issuance of any opinion letter related to such offering or sale. READ the FULL TEXT SEC Complaint.

SEC Charges Municipal Adviser and its Principal with Defrauding Mississippi City (SEC Litigation Release No. 24025)
The SEC filed Securities and Exchange Commission v. Malachi Financial Products, Inc., et al., (Complaint, United States District Court for the Southern District of Mississippi, 18-CV-00001) seeking permanent injunctions, civil penalties, disgorgement plus prejudgment interest.
READ FULL TEXT SEC Complaint. The Complaint alleges that Atlanta, Georgia-based municipal advisor Malachi Financial Products, Inc. and its principal, Porter B. Bingham, fraudulently overcharged the City of Rolling Fork for municipal advisory services related to an October 2015 municipal bond offering. As set forth in part in the SEC Litigation Release:

[A]fter the offering closed, Malachi and Bingham submitted two invoices to the bond trustee for payment. The SEC alleges that one of those invoices was fraudulent, because it was for services that Malachi and Bingham did not perform and the city did not authorize. The complaint also alleges that Bingham failed to disclose to the city that he had accepted payments totaling $2,500 from Anthony Stovall, an employee of a municipal underwriter, shortly before he and Malachi recommended that the city hire Stovall's firm to underwrite the bond offering. The complaint alleges that the city ultimately hired that underwriting firm based on Bingham and Malachi's recommendation. Finally, the complaint alleges that Malachi and Bingham violated their fiduciary duty to the city.