Securities Industry Commentator by Bill Singer Esq

May 23, 2018

Biotech Company CEO and Associate Indicted on Securities Fraud Charges (DOJ Press Release)
PIxarBio Corp Chief Executive Officer Frank Reynolds and M. Jay Herod were indicted in the United States District Court for the District of Massachusetts on two counts each of securities fraud and manipulative trading. scheme to defraud. Prosecutors alleged in part that Reynolds promised investors huge returns and touted a prospective drug, carbamazepine, (which actually already existed) as an opiate addiction treatment. Also, prosecutors alleged that Herod had engaged in market manipulation through such techniques as matched trading or marking at the close.
Federal prosecutors alleged Art Masters LLC, which does business as Palm Beach Liquidation Gallery, and its principal Eugene Marotta, and William Clutter, who does business as Edge Graphics, mailed over 150,000 fraudulent solicitations styled as personalized notifications that the recipient won a large package of cash and prizes worth more than $350,000, but needed to pay a fee of $161.25 to claim the package. Victims who sent fees received a list of publicly-advertised sweepstakes and an ink-jet printed reproduction of artwork. The United States District Court for the Southern District of Florida entered a consent decree of permanent injunction against  Art Masters LLC, Marotta, and Clutter enjoining them from mailing solicitations promising delivery of a prize, offering for sale information on sweepstakes or lotteries, or making other deceptive representations. Defendants are also precluded from creating, renting, or selling lists of victims who responded to defendants' mailings. Finally, the consent decree authorizes the U.S. Postal Inspection Service to return any victim money or personal checks sent to the defendants and detained by the Postal Inspection Service.

Batting 500 In FINRA Expungement ( Blog)
Ty Cobb's career batting average was .3664 and Rogers Hornsby's was .3585. Those are the two best career averages in the history of major league baseball. All of which means that if you get a hit about three times for every ten plate appearances, you're likely an All-Star and maybe headed for the Hall of Fame. Not everything in life, however, equates to baseball. If only a third of a surgeon's patients survive, that doctor ain't no all-star or future hall-of-famer. Lawyers -- well, that's an interesting scenario. Prosecutors should probably win over 90% of their cases because they are supposed to have probable cause before filing charges. Defense lawyers, on the other hand, well those folks tend to represent a large percentage of guilty folks; and sometimes the best you can do is reduce a death sentence to life, a life sentence to 20 years, a 20-year sentence to 5 years, and possession of a truckload of cocaine to possession of narcotics paraphernalia (the coke spoon around your neck). Like I said, you got baseball and you got life. In a recent FINRA expungement case, the Claimant stockbroker batted 500. You be the judge as to how well he did.

Remarks at the FINRA Annual Conference by Brett Redfearn, Director, SEC Division of Trading and Markets READ the FULL TEXT SPEECH.

To exercise such reasonable diligence, care, skill, and prudence the broker-dealer would be required to do three things when it recommends a securities transaction or investment strategy to a retail customer.
    • First, the broker-dealer would need to understand the risks and rewards associated with the security or investment strategy, and have a reasonable basis to believe that it could be in the best interest of at least some retail customers.
    • Second, the broker-dealer would be required to match this understanding of the security or strategy to the particular retail customer to form a reasonable belief that the security or strategy is in the retail customer's best interest. The customer's investment profile would be developed using the extensive investment profile information that broker-dealers are required to attempt to gather today pursuant to FINRA rules. We thought that the investment profile information that is currently required has worked well, so we did not propose to change it. 
    • Finally, the broker-dealer would be required to have a reasonable basis to believe that a series of recommended transactions is not excessive and is in the retail customer's best interest when taken together in light of the customer's investment profile.

Grand Blanc Man and Flint Woman Indicted For Involvement in Fraudulent Investment Scheme (DOJ Press Release)

Larry A. Holley, 61 and Patricia Enright a.k.a. Patricia Gray were indicted in the United States District Court for the Eastern District of Michigan on conspiracy to commit wire and mail fraud, wire fraud, mail fraud, and money laundering. The Indictment alleges that Holley, who is a pastor at Abundant Life Ministries in Flint, and Enright operated Treasure Enterprise, LLC, which fraudulently purported to provide financial planning and asset management services to investors.  Holley and Enright allegedly solicited many of their investors at financial seminars held at churches. As set forth in part in the DOJ Press Release:

The indictment alleges that in order to lure the potential investors, many of whom took their money out of legitimate investments-such as individual retirement accounts (IRAs) and 401Ks-Holley and Enright promised high, guaranteed returns, and the safe return of an investor's entire principal at the end of the investment period.  The money, however, was not invested and did not earn the profits to pay the guaranteed interest payments.  Instead, Holley and Enright, and others directed by them, simply deposited the victim investor funds into Treasure's bank accounts and then used the money for their personal benefit, for the benefit of Abundant Life Ministries, to make interest and principal payments to earlier investors, and to pay other Treasure employees.