Securities Industry Commentator by Bill Singer Esq

March 20, 2018

In the Matter of Department of Enforcement, Complainant, vs. Kenneth J. Mathieson, Respondent (FINRA National Adjudicatory Counsel Decision, Complaint No. 2014040876001 / March 19, 2018)
As set forth in the Syllabus of the NAC Decision [Ed: footnotes omitted]:

Respondent Kenneth J. Mathieson appeals the sanctions imposed on him in a December 16, 2016 Extended Hearing Panel decision. The Extended Hearing Panel suspended Mathieson for one year in all capacities and fined him $50,000 for participating in private securities transactions and engaging in outside business activities without prior written notice to, and permission from, his member firm, Morgan Stanley Smith Barney, LLC ("Morgan Stanley"). The Extended Hearing Panel also found that Mathieson submitted a false compliance questionnaire. On appeal, Mathieson admits his violations, but argues that the Extended Hearing Panel misapplied the relevant aggravating and mitigating factors and, consequently, the sanctions imposed are too severe. 

After an independent review of the record, we affirm the Extended Hearing Panel's findings of violation and the $50,000 fine, but reduce Mathieson's suspension to six months.

Broker Charged With Repeatedly Putting Customer Assets At Risk (SEC Press Release 2018-45)
The Securities and Exchange Commission alleged that during 2015, registered broker-dealer Electronic Transaction Clearing (ETC) improperly transferred almost $8 million of fully paid securities belonging to cash customers to an account at another clearing firm to meet margin requirements on borrowed funds. The SEC further alleged that the firm had used over $17 million of securities of two customers to borrow funds without consent. Finally, the federal regulator alleged that ETC had improperly commingled customers' securities and allowed a customer's excess margin securities to be loaned out by the other clearing firm. Without admitting or denying the SEC's findings, ETC agreed to the entry of an Order charging it with violation the Securities Exchange Act and Customer Protection Rule as well as other related rules,  and the firm agreed to cease and desist from further violations.  Also, ETC agreed to a censure and to pay an $80,000 penalty

Securities and Exchange Commission v. Americrude, et. al., (SEC Litigation Release 24068)
In a Complaint filed in the United States District Court for the Northern District of Texas, the SEC alleged that Shezad Akbar used his company, Americrude, Inc., and the firm's purportedly nominal President Daniel Waite used cold calls, high-pressure sales pitches, and false and misleading statements to lure investors into Americrude's fraudulent offerings. The defendants allegedly misrepresented Americrude's track record, the reserve potential of its oil-and-gas prospects, and its intended use of proceeds. Without admitting or denying the allegations, Waite consented to the entry of a final judgment that permanently restrains and enjoins him from violating the '33 and '34 Acts, and restrains and enjoins him from participating in the issuance, purchase, offer or sale of any oil-and-gas related securities (said injunction does not prevent Waite from purchasing or selling oil-and-gas related securities for his own personal account). Waite is ordered to disgorge $32,409.52, prejudgment interest of $1,763.30, and a civil penalty of $100,000. The SEC's litigation against Americrude and Akbar continues. READ the FULL TEXT SEC Compliant.

SEC Obtains Summary Judgment in Grand Central Post-It Notes Insider Trading Case (SEC Litigation Release No. 24070)
Securities and Exchange Commission v. Steven Metro, (United States District Court for the District of New Jersey,14-CV-05844)
The District Court granted the SEC's motion for summary judgment against former law firm employee Steven Metro, who had been permanently enjoined and ordered to pay a $25,000 civil penalty pursuant to his role charged as part of an insider trading scheme infamously involving the passing of information on paper napkins.
Geannis Gonzalez, Alfredo Tovar, Robinson Castillo, Jamie Vives Castillo, Quiana Velasco, Jose Daniel Estrella, and Pedro Reyes have all pled guilty to conspiracy to commit money laundering in connection with having opened bank accounts in the names of shell corporations in order to receive the proceeds of various fraudulent schemes, including romance frauds, email hacking schemes, and inheritance and lottery scams, that victimized individuals and corporations across the United States.  The cited bank accounts received illegal proceeds ranging from $3,381,110 to $7,177,442; and the overall laundered proceeds was about $94 million.

Founder And CEO Of Defunct Tampa Technology Company Sentenced To 80 Months In Prison For Investment Fraud (DOJ Press Release)
In 2010, Timothy Munro Roberts and Terrance Taylor founded Savtira Corporation, Inc., which purportedly offered a centralized cloud-based shopping cart platform for retailers. Roberts and Taylor fraudulently solicited investors for the company by claiming it was profitable and owned patents, that they had entered into executed agreements with nationally recognized technology firms, and that Savtira was valued between $450 million and $540 million. Roberts and Taylor misused and misappropriated investor funds for personal expenses and made cash withdrawals without the investors' consent. Further, the two never disclosed to investors that Roberts had previously been fined and banned from selling unregistered securities pursuant to his settlement with the SEC. Following his guilty plea in federal court, Roberts was sentenced to six years and eight months in federal prison for wire fraud and ordered to pay $5,874,912.52 in restitution. 

SEC Announces Its Largest-Ever Whistleblower Awards (SEC Press Release 2018-44)
The SEC announced its highest-ever Dodd-Frank whistleblower awards, with two whistleblowers sharing a nearly $50 million award and a third whistleblower receiving more than $33 million. As set forth in part in the SEC Press Release:

The SEC has awarded more than $262 million to 53 whistleblowers since issuing its first award in 2012.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.