Securities Industry Commentator by Bill Singer Esq

July 10, 2018
In a Complaint filed in the United States District Court for the Northern District of California, the SEC alleged that Charles Schwab & Co., Inc. he SEC's complaint charges Schwab with failing to file Suspicious Activity Reports (SARs) on the suspicious transactions of 83 independent investment advisers that it terminated from using Schwab to custody their client accounts, in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder. The Complaint alleged that  at least 47 of the terminated advisers engaged in transactions through Schwab that it knew, suspected, or had reason to suspect were suspicious and required the filing of a SAR. Schwab agreed to settle the action by consenting, without admitting or denying the allegations of the complaint, to the entry of a permanent injunction and the payment of a $2.8 million civil penalty. READ the FULL TEXT Complaint

In a FINRA Arbitration Statement of Claim filed in May 2016, Claimant Brown asserted age discrimination; breach of contract for failure to pay the agreed upon basis points on Dyal Fund assets under management; breach of contract for failure to continue the agreed upon amount of carried interest; retaliation for alleged whistleblowing under the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and a declaratory judgment. In the Matter of the Arbitration Between Jeffry Paul Brown, Claimant, v. Neuberger Berman LLC and NB Alternatives Advisers LLC, Respondents (FINRA Arbitration Decision, 16-01342) Respondents generally denied the allegations and asserted various affirmative defenses. The FINRA Arbitration Panel denied Claimant's claims.

Stockbrokers Victimized By Customer Imposter And FINRA Fees And Charges ( Blog)
FINRA continues to have a hard time understanding the concept of "victim." In a recent FINRA expungement arbitration, two stockbrokers were victimized by complaints falsely filed against them by an imposter. Given that the customer repudiated the complaints, there isn't much dispute about them being bona fide. You'd sort of think that FINRA would have a procedure to quickly and without cost secure the expungement of such bogus complaints from a stockbroker's record. After reading today's featured Blog case, you may wish to re-think your concepts of fair and reasonable.

SEC Obtains Final Judgments Against Attorney and Law Firm Business Manager Charged with IIIegal Sales of Ubi Blockchain Internet Stock (SEC Litigation Release No. 24190)
In a Complaint filed in the United States District Court for the Southern District of New York, the SEC alleged that T.J. Jesky, Esq. and his law firm's business manager Mark F. DeStefano received 72,000 restricted shares of UBI Blockchain stock to be sold at a fixed price of $3.70 per share under the registration statement' however, Jesky and DeStafano sold the shares from $21.12 to $48.40. Without admitting or denying the allegations in the SEC's complaint, Jesky and DeStefano agreed to return approximately $1.4 million of allegedly ill-gotten gains, pay $188,682 in civil penalties and be subject to permanent injunctions.

Former CEO and CFO of ITT Barred and Ordered to Pay Penalties (SEC Litigation Release No. 24188)
In a Complaint filed in the United States District Court for the Southern District of Indiana, the SEC alleged that former ITT Educational Services Inc.CEO Kevin Modany and former CFO Daniel Fitzpatrick fraudulently concealed the poor performance and looming financial impact of two student loan programs that ITT financially guaranteed. Without admitting or denying the allegations in the Complaint, Modany and Fitzpatrick settled to the SEC's claims charging them as control persons for ITT's fraud and other violations. The Court barred Modany and Fitzpatrick from serving as officers and directors of public companies for five years, and ordered them to respectively pay penalties of $200,000 and $100,000.  Further, Modany and Fitzpatrick were enjoined from controlling any person who violates Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Finally, Modany and Fitzpatrick agreed to be suspended from appearing and practicing before the SEC as accountants with permission to apply for reinstatement after five years.