Securities Industry Commentator by Bill Singer Esq

March 2, 2018
Former Oyster Bay, NY town attorney and deputy supervisor Leonard Genova was charged in a Complaint filed by the SEC in the United States District Court for the Eastern District of New York with defrauding investors in 26 of the Town's municipal securities offerings from August 2010 to December 2015. The SEC alleged that Genova hid the existence and potential financial impact of four private loan involving the Town that guaranteed over $20 million with a businessman who owned and operated restaurants and concession stands at several town facilities. The SEC deemed the this  undisclosed information to be of a material nature because of its potential impact on the Town's finances. Genova agreed to settle the charges, in part, via  permanent injunctions against violating the charged securities laws or participating in any offerings of municipal securities. READ the FULL TEXT COMPLAINT Securities and Exchange Commission v. Leonard Genova, (Complaint, EDNY,  18-CV-01298 )

Bubitotious Infectosis, FINRA Exams, and Loaded Dice ( Blog)
It's a story as old as elementary school. They give a test. Most of us take the test. Some folks cheat and bring notes that they have cleverly hidden. Then there are those who claim that they couldn't show up to take the test because they were home sick with bubitotious infectosis. No, I didn't make that up. It's a real illness. You get it from eating cooked sushi. Well . . . okay, maybe I made that up but, you know, so what. It sounded real, right? I'm not saying that I ever claimed to have come down with bubitotious infectosis when a math test was scheduled but, on the other hand, I wouldn't believe anything that I say, so, who knows. Anyway, in today's Blog we feature the story of a guy who didn't show up to take the same registration exam several times but figured that he could cross his fingers behind his back and pretend that he had taken the test and passed. Given that we're discussing a FINRA disciplinary settlement, you sort of figured out that all those machinations didn't work out.

New Mexico man charged for defrauding investors out of $4.4 million (DOJ Press Release)
Between 2006 and 2012, Eugene Turner and Timothy E. McShane allegedly solicited at least $4.4 million in investments in several companies they had established. Turner and McShane issued unregistered promissory notes and/or founder's shares that were purportedly collateralized by land pledges, crop pledges, real property and other items, but, in fact, those assets did not exist. Further, funds were used to make Ponzi-like payments to complaining investors. McShane, of Stow, has pleaded guilty to his role in the scheme. Turner was charged in a criminal Information with one count of wire fraud.

In the Matter of Ameriprise Financial Services, Inc., Respondent,  (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; '33 Act Rel. No. 10462; '34 Act Rel No. 82792; Invest. Adv. Act Rel. No. 4862; Admin. Proc. File No. 3-18381/ February 28, 2017) (the "OIP").
In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Ameriprise Financial Services, Inc. submitted an Offer of Settlement, which the federal regulator accepted .Ameriprise agreed to a Censure, to cease and desist from violations of securities laws and to a $230,000 civil monetary penalty. As set forth in the "Summary" portion of the OIP:

1. From at least January 2010 through June 2015 (the "Relevant Period"), Ameriprise disadvantaged certain retirement plan customers ("Eligible Customers")1 by failing to ascertain that they were eligible for a less expensive share class, and recommending and selling them more expensive share classes in certain open-end registered investment companies ("mutual funds") when less expensive share classes were offered to these Eligible Customers by Ameriprise on its platform. Ameriprise did so without disclosing that it would receive greater compensation from the Eligible Customers' purchases of the more expensive share classes. Eligible Customers did not have sufficient information to understand that Ameriprise had a conflict of interest resulting from compensation it received for selling the more expensive share classes. Specifically, Ameriprise recommended and sold these Eligible Customers Class A shares with an up-front sales charge or Class B or Class C shares with a back-end contingent deferred sales charge ("CDSC") (a deferred sales charge the purchaser pays if the purchaser sells the shares during a specified time period following the purchase) and higher ongoing fees and expenses, when these Eligible Customers were eligible to purchase load-waived Class A shares. Ameriprise omitted material information concerning its compensation when it recommended the more expensive share classes to these Eligible Customers. Because Ameriprise did not ascertain these customers' eligibility for load-waived A shares, it did not disclose to Eligible Customers that the purchase of the more expensive share classes would negatively impact their overall return, in light of the different fee structures for the different fund share classes. 

2. In making those recommendations of more expensive share classes while omitting material facts, Ameriprise willfully violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. These provisions prohibit, respectively, in the offer or sale of securities, obtaining money or property by means of an omission to state a material fact necessary to make statements made not misleading and engaging in a course of business which operates as a fraud or deceit on the purchaser.