Securities Industry Commentator by Bill Singer Esq

May 2, 2018
Michael Kail was indicted in the United States District Court for the Northern District of California on nineteen counts of wire fraud, three counts of mail fraud, and seven counts of money laundering in connection with allegations that he accepted kickbacks for approving payments to at least nine companies seeking to do business with Netflix, where he was Vice President in charge of the company's Internet Technology department. Federal prosecutors alleged that Kail engaged in honest services fraud resulting in his receipt of over $500,000 from at least three outside companies; and he also received valuable stock options from numerous other Netflix business partners.  

SEC Enforcement Division Issues FAQs for Share Class Selection Disclosure Initiative (SEC Release 2018-75)
The SEC's Division of Enforcement issued answers to frequently asked questions (FAQs) on the Share Class Selection Disclosure Initiative, which seeks to protect advisory clients from and return money to those affected by undisclosed conflicts of interest. READ the FULL TEXT SCSDI.
The FAQs provide additional information about adviser eligibility, disgorgement, and the distribution of funds to clients. READ the FULL TEXT FAQs.
As set forth in part in the SEC Release:

Under the SCSD Initiative, the Enforcement Division will recommend standardized, favorable settlement terms to investment advisers who self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees by the adviser, its affiliates, or its supervised persons for investing advisory clients in a 12b-1 fee paying share class when a lower-cost share class of the same mutual fund was available for the advisory clients.  In such cases the Enforcement Division will recommend settlements that do not impose a civil monetary penalty while requiring participating advisers to return ill-gotten gains to harmed advisory clients.

Solicited System Snafu Stiffs Settling Stifel Stockbroker ( Blog)
Oh my. You got a ticket to ride but it's a one-way ticket to the old FINRA slammer. You're supposed to check "BUY" when it's a buy and "SELL" when it's a sell and "SOL" when it's solicited and "UNSOL" when it's unsolicited and . . . well, there's lots of boxes and lines that require all the terms of the ticket. Visit enough trading desks and you'll hear the tales of the idiot who entered ABZ instead of ABC or wound up creating an artificial short when he sold 100,000 shares instead of bought them. In today's Blog, we feature the tale of a stockbroker who couldn't do something but then could but his firm's order-entry system was wrongly programmed so he couldn't do what he wasn't allowed to do but now could but for the IT snafu. So . . . our enterprising stockbroker engaged in a bit of self-help. I'm guessing that, one day, they'll tell his story on the trading desk. No one's laughing today but, you know, give it some time. Wall Street loves misery and a good joke about it.

Man Pleads Guilty to $1.2 Million ATM Skimming Scheme (DOJ Press Release)
Roberto De Miranda Martinez pled guilty to conspiracy to commit bank fraud, and bank fraud in connection with a $1.2 million ATM skimming and cloned card scheme.When De Miranda Martinez was apprehended by authorities, he was installing a card reading ATM skimming device and camera on an ATM.

Former 5linx Owner Pleads Guilty To Wire Fraud And Tax Charge For His Role In Multi-Million Dollar Marketing Scheme (DOJ Press Release)
Craig Jerabeck pled guilty in the United States District Court for the Western District of New York to conspiracy to commit wire fraud and filing a false tax return. Federal prosecutors alleged that Jerabeck, serving as President/Chief Executive Officer, and co-Defendnats Jeb Tyler, serving as Vice President, and Jasn Gluck, servign as Vice President and Secretary, started 5LINX Enterprise, Inc., which offered utility and telecommunications services, health insurance, nutritional supplements, and business services through independent sales representatives. The three defendants allegedly sold 5LINX stock valued at $5.5 million to investment companies Trillium Lakefront Partners III, L.P.; Trillium Lakefront Partners III, NY L.P.; and Shalam Investment Co., L.L.C. The Defendants received about $2.3 million from a vendor without 5LINX's investors, Board, or other stockholders despite such receipt being a violation of the executives' Stockholders Agreements. Jerabeck allegedly failed to report 5LINX income and took inappropriate deductions amounting to about $118,620 in Internal Revenue Service tax losses. Charges are pending against Tyler and Bluck.