Securities Industry Commentator by Bill Singer, Esq.

April 25, 2018

12:24 pm, 04/25/2018

Due to the previously announced price scale code issue affecting BCCG execution reports, trading in the following Tape C symbols will be suspended for the balance of the trading day. Any open orders in these securities will be cancelled.






All other systems are operating normally.   

11:16 am, 04/25/2018

NYSE customers using Binary CCG order entry ports are advised that execution reports priced at or above $1000 in some Tapes B and C securities (including AMZN, BKNG, GOOG, GOOGL) are being published with a 'price scale' code of 5.  NYSE expects this behavior to continue for trading today and will provide a further update before the start of trading tomorrow.

All other systems, including the price scale code for Tapes B and C market data, are operating normally. 

On May 1, 2017, the Securities and Exchange Commission ("SEC") filed an Order Instituting Administrative Proceedings, Making Findings, and Imposing a Cease-and-Desist Order (the "OIPs") against Respondent Altaba Inc. f/d/b/a Yahoo! Inc.. In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Yahoo Inc. oubmitted an Offer of Settlement, which the federal regulator accepted. Pursuant to the Order, Respondent shall cease and desist from committing or causing any violations and any future violations of the Securities Act and the Exchange Act and will pay a $35 million civil money penalty. In the Matter of Yahoo! Inc., Respondent (OIP; '33 Act Rel. No. 10485; '34 Act Rel. No. 83096 ; Acct. and Aud. Enf. Rel. No. 3937; Admin. Proc. File No. 3-18448 / April 24, 2018). 
As set forth in the "Summary" section of the OIP:

1. This matter concerns material misstatements and omissions by Yahoo, one of the world's largest Internet media companies, regarding a 2014 data breach affecting more than 500 million of its user accounts. In late 2014, Yahoo learned of a massive breach of its user database that resulted in the theft, unauthorized access, and acquisition of hundreds of millions of its users' data, including usernames, birthdates, and telephone numbers. At that time, the breach was the largest known theft of user data. 

2. Despite its knowledge of the 2014 data breach, Yahoo did not disclose the data breach in its public filings for nearly two years. To the contrary, Yahoo's risk factor disclosures in its annual and quarterly reports from 2014 through 2016 were materially misleading in that they claimed the company only faced the risk of potential future data breaches that might expose the company to loss of its users' personal information stored in its information systems, as well as potential future litigation, remediation, increased costs for security measures, loss of revenue, damage to its reputation, and liability, without disclosing that a massive data breach had in fact already occurred. Yahoo management's discussion and analysis of financial condition and results of operations ("MD&A") in those reports was also misleading to the extent it omitted known trends or uncertainties with regard to liquidity or net revenue presented by the 2014 data breach. 

3. Yahoo's disclosure violations continued in connection with a proposed sale of its operating business to Verizon Communications, Inc. ("Verizon") in July 2016. Although Yahoo was aware of additional evidence in the first half of 2016 indicating that its user database had been stolen, Yahoo made affirmative representations denying the existence of any significant data breaches in a July 23, 2016 stock purchase agreement with Verizon, by which Verizon was to acquire Yahoo's operating business for $4.825 billion. The stock purchase agreement was attached to a Form 8-K filed with the Commission on July 25, 2016. 

4. In September 2016, Yahoo disclosed the 2014 data breach in a press release filed as an attachment to a Form 8-K and also disclosed the 2014 data breach to Verizon. The day after Yahoo publicly disclosed the breach, Yahoo's market capitalization fell nearly $1.3 billion by virtue of a 3% decrease in its stock price. After Yahoo disclosed the 2014 data breach, Verizon renegotiated the stock purchase agreement to reduce the price paid for Yahoo's operating business by $350 million, representing a 7.25% reduction in price. 

5. Based on the foregoing conduct, and the conduct described herein below, Yahoo violated Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15 thereunder.
Frank Reynolds, M. Jay Herod, and Kenneth Stromsland were charged in the United States District Court for the District of Massachusetts securities fraud in connection with their alleged scheme to defraud biothech firm PixarBio Corp.'s investors through false and misleading statements and by manipulative trading in the company's shares. As alleged in part in the DOJ Press Release:

[I]n a December 2015 email and memorandum to potential investors, Reynolds promised investors "a HUGE return on investment (ROI) for any investors in PixarBio's NeuroRelease." He told investors: "The value of our portfolio on Wall Street is soaring with excitement around our sales partnership. At only $1,000,000,000 right now, as we prepare to replace morphine in the clinic in late 2017 or early 2018, and we expect our valuation to long-term trend UP." In reality, the government alleges, PixarBio did not have a market value of one billion dollars, or a product to end "thousands of years of morphine and opiate addiction." Rather, the complaint alleges, the prospective drug, carbamazepine, is not a treatment for opiate addiction at all, but an existing drug for which PixarBio purported to have developed an additional means of delivery, via injection, in a time-release form. 

Former Ameriprise Rep Wins Split Decision In FINRA Arbitration
( Blog) 
You ever start reading a decision in a lawsuit and once you get past the introduction, you're pretty sure that you know how the matter will be decided? Today's two-for-one FINRA Arbitration was just such a case. To be candid, I had placed my money on Claimant Ameriprise and against its former employee. No . . . I'm not a saying that I agreed with the firm's claims. I'm simply saying that how the assertions and allegations set up in the FINRA Arbitration Decision suggested that the former employee was going to lose. Boy, was I wrong! 

CFTC Charges New York Resident Kevin Scott Antonovich with Commodity Pool Fraud (CFTC Release 7716-18)
CFTC filed a Complaint against Kevin Scott Antonovich in the United States District Court for the Eastern District of New York. The Complaint alleges that from September 2015 through August 2016, Antonovich fraudulently solicited and received approximately $284,000 from at least 154 pool participants in connection with pooled investments in off-exchange binary options.  Further, the Complaint alleges that Antonovich misappropriated about $124,000 for business expenses and his personal use, made false and misleading representations to pool participants, and fabricated documents purporting to show funds available for return to pool participants. CFTC seeks restitution, disgorgement , civil monetary penalties, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act./ READ THE FULL TEXT CFTC Complaint.

LabCFTC seeks to facilitate market-enhancing fintech innovation by making the CFTC more accessible to innovators and to provide the CFTC with a conduit for emerging technologies. Accordingly LabCFTC announced it is requesting public input to gather ideas and topics for innovation competitions to advance the agency's FinTech goals. A Request for Input (RFI) in the Federal Register seeks feedback on: (1) focus areas for potential innovation competitions, as well as (2) how competitions could best be structured and administered to maximize their impact. While the RFI raises the possibility of competitions focused on data visualization tools, machine-readable regulatory rulebooks, and "smart" notice and comment systems, it seeks to crowd source what may be the most promising topics directly from the innovator community.