Securities Industry Commentator by Bill Singer Esq.

March 28, 2018

SEC Charges Recidivist Broker-Dealer in Employee's Long-Running Pump-and-Dump Fraud (SEC Press Release 2018-49)
The SEC instituted administrative proceedings against Wedbush Securities, Inc. In the Matter of Wedbush Securities, Inc., Respondents (Order Instituting Administrative Proceedings; '34 Act Rel. No. 82954; Admin. Proc. File No. 3-18411 / March 27, 2018) (the "Wedbush OIP"). The Wedbush OIP alleges that the broker-dealer failed reasonably to supervise Timary Delorme, who was allegedly involved in a purportedly long running microcap stocks pump-and-dump scheme. Also, in anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Timary Delorme  submitted an Offer of Settlement, which the federal regulator accepted.  In the Matter of Timary Delorme, Respondents (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; '34 Act Rel. No. 82953; Admin. Proc. File No. 3-18410 / March 27, 2018) (the "Delorme OIP"). The Delorme OIP found that Delorme violated the antifraud provisions of the federal securities laws. Delorme agreed to pay a $50,000 penalty, accept the imposition of  industry and penny stock bars, and to cease and desist from future violations. 
As set forth in part in the SEC Press Release:

The Securities and Exchange Commission announced charges against Wedbush Securities Inc. for failing to supervise employee Timary Delorme after the broker-dealer ignored numerous red flags indicating that Delorme was involved in a long-running pump-and-dump scheme targeting retail investors. Delorme agreed to settle fraud charges stemming from the same scheme. This is the second SEC action against Wedbush this year and the third since 2014.      

The SEC's investigation found that Delorme - a registered representative of Wedbush - received undisclosed benefits for investing her customers in microcap stocks that were the subject of a "pump-and-dump" scheme orchestrated by Izak Zirk Engelbrecht, who was previously charged by the Commission and criminal authorities in separate actions.  According to the SEC's order, Wedbush ignored multiple signs of Delorme's fraud, including a customer email outlining Delorme's involvement in the scheme and multiple FINRA arbitrations and inquiries regarding her penny stock trading activity.  In response to these clear red flags, Wedbush conducted two flawed and insufficient investigations into Delorme's conduct but failed to take appropriate action.

BILL SINGER's COMMENT: I would note my objection to the SEC Press Release's headline's characterization of Wedbush as "Recidivist." I am not defending Wedbush but I am objecting to the SEC's perjorative characterization at a time when the federal regulator is merely alleging misconduct and the Respondent is entitled to the presumption of innocence. It is disgraceful that the federal regulator would tag Wedbush as a recidivist in a press release headline announcing the filing of charges yet such approbation in never attached to repeat offenders among any of Wall Street's major firms, all of which have pled to or been found to have committed serious violations of rules, regulations, and laws. Worse, the sanctimonious SEC not only fails to label Wall Street's major firms as recidivists but the same federal regulator routinely grants those firms waivers from the "Bad Actor" provisions of the securities laws pursuant to findings of misconduct.

Mandeville Financial Adviser Convicted of Stealing Up to $1.5 Million from Investors (DOJ Press Release)
Ralph Willard Savoie pled guilty to mail fraud in connection with allegations that from around January 2013 through at least March 2016, he stole about $1.5 million by fraudulently telling investors that he would invest their funds in securities and insurance offering high rates of return, and described the investment opportunities as a "sure thing."  In fact, Savoie diverted the funds for such personal uses as jewelry, hotels,  restaurants, credit card bills, and rent. Further, he used some funds to pay off previously victimized investors. In furtherance of his fraud, Savoie  concealed from victim investors that the Financial Industry Regulatory Authority had barred him from acting as a broker or otherwise associating with firms that sell securities to the public. 
Also READ: In the Matter of Ralph W. Savoie, Respondent (FINRA AWC  #2015046239401, September 22, 2015) : 

Savoie, in violation ofFINRA Rules 8210 and 2010, refused to respond to FINRA requests for information and documents issued pursuant to FINRA Rule 8210 in connection with an investigation that he misappropriated more than $665,000 from at least one firm customer.

Body And Estate And Soul And A Counterfeiter And A Murderer And Merrill Lynch ( Blog)
Today's Blog considers allegations that Merrill Lynch caused the wrongful death of one of its customers. Yeah . . . I thought that opening sentence would get your attention. Let me further titillate you with the additional allegation that Merrill Lynch had assisted a prolific counterfeiter in defrauding the deceased customer. And if all of that doesn't entice you to read today's blog, you should know that it also includes three lovely music videos by Anita Baker, Amy Winehouse, Tony Bennett, and Billie Holiday -- as eclectic a group as you may ever find in the company of a murderer and counterfeiter (alleged as they may be).
The SEC charged energy storage and power delivery product manufacturer Maxwell Technologies, Inc. and one of its former sales executives and corporate officers Van Andrews with fraudulently prematurely recognizing revenue as part of a scheme to inflate the company's reported financial results and, accordingly, better meet analyst expectations. The SEC also charged Maxwell's former CEO David Schramm and former controller James DeWitt for failing adequately to respond to red flags that should have alerted them to the misconduct. Without admitting or denying the findings that they caused certain violations by Maxwell, Maxwell and Andrews consented to an SEC Order and agreed to pay penalties of $2.8 million and $50,000, respectively.  Andrews also agreed to be barred from serving as an officer or director of a public company for five years. Also, without admitting or denying the findings that they caused certain violations by Maxwell, Schramm agreed to pay a total of nearly $80,000 in disgorgement, prejudgment interest, and penalty and DeWitt agreed to pay a $20,000 penalty.  READ the FULL TEXT SEC Order.