Securities Industry Commentator by Bill Singer Esq

August 3, 2018

Advance-Fee Frauds Keep Dropping the FINRA Name -- Don't Fall for "Regulator" Imposter Ploys (FINRA Investor Alert)
As asserted in the Investor Alert, An investor from the United Kingdom purportedly notified FINRA that he had received a detailed document that appeared to be signed by Susan Schroeder, FINRA's Head of Enforcement. In consideration of a $28,000 advance payment, the letter offered "guarantees" related to the conversion and registration of shares of stock that would be transferred to the investor. The document contained 60 pages of detailed information including fake Nasdaq trade reports, false FDIC "Data Capture Forms," and other quasi-official documentation designed to build credibility. FINRA reiterates that "its officers and employees do not offer investment guarantees."
Wall Street's old commission system ain't what it used to be. We got fewer big broker-dealers and they arbitrarily adjust the compensation grid in ways that inexorably lower the percentages earned on increasingly higher production levels coupled with so-called "incentives" to push dubious house-product and to cross-sell and up-sell. As the trend seems to be in the direction of jettisoning commissions for salaries, many who once walked the broker-dealer registered representative path are now headed for the registered investment advisor byway. Unfortunately, with the growth of robo-advisors and a sense that we may be nearing an RIA saturation point, a lot of folks are caught between staying and going, or simply throwing in the towel and finding another career. Bitcoin anyone? Cannabis sales anyone? For the intrepid who are still hanging in with the FINRA member firm model, they are increasingly apt to explore outside business activities, private securities transactions, and ways to generate referral fees. In a recent FINRA arbitration, we have a registered person who believes he was screwed out of a fee for referring VA/Medicaid planning clients. It would seem that the contra-parties to his referral fee agreement have a different view. Hence, the genesis of a lawsuit.

CFTC Announces Multiple Whistleblower Awards Totaling More than $45 Million (CFTC Release 7767-18)
Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the CFTC's Whistleblower Program.  Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected.  The CFTC can pay awards not only on CFTC enforcement actions but also related actions brought by foreign futures authorities if certain conditions are met. 
CFTC announced multiple whistleblower awards totaling more than $45 million: READ:

Founder And Managing Partner Of Accounting Firm Pleads Guilty To Making False Filings With The U.S. Department Of Labor (DOJ Press Release)
Salvatore Armao, founder, managing partner, Certified Public Accountant, and Certified Fraud Examiner for Armao LLP pled guilty to a one-count Information in the United States District Court for the Southern District of New York charging him with making false statements in employee benefit plan records and reports required by the Employee Retirement Income Security Act of 1974 ("ERISA").in order to conceal an embezzlement scheme in which more than $100,000 was embezzled from a labor union (the "Union") and its employee welfare benefit plan (the "Plan"). READ the FULL TEXT Information As set forth in part in the Press Release:

From at least in or about 2010 through in or about 2014, the president of the Union, who also served as a trustee of the Plan (the "President-Trustee"), repeatedly used Union funds to pay for his personal expenses, including payments for spa treatments, a gym membership, a second car, medical expenses, dues for an actors' union, personal credit card charges, and ATM cash withdrawals.  The President-Trustee used his Union credit card to pay for personal expenses and then "reimbursed" the Union with funds transferred from the Plan.  In total, the President-Trustee embezzled more than $100,000 from the Union over approximately three years. 

During the period of the embezzlement, the Firm served as the accountant and auditor for the Union and the Plan.  To facilitate and conceal the President-Trustee's embezzlement, ARMAO falsely classified as "loans" the personal expenses for which the President-Trustee paid using Union and Plan funds in accounting records and in DOL filings for the Union.  In at least 2012, 2013, and 2014, ARMAO falsely classified the President-Trustee's personal expenses as loans in DOL filings for the Union.  ARMAO also provided false information on DOL filings for the Plan, concealing from DOL the President-Trustee's prohibited transfers of tens of thousands of dollars from the Plan to the Union which, in turn, facilitated and concealed the President-Trustee's use of Union funds to pay his personal expenses.  ARMAO repeatedly caused these false filings to be made to DOL despite being a Certified Fraud Examiner. 

Under the terms of his plea agreement, ARMAO has agreed to a 13-year ban, pursuant to 29 U.S.C. §§ 504 and 1111, which generally prohibits him from, among other things, being employed by a labor union or employee benefit plan.

Former Hillsborough Resident Indicted In Investment Fraud Scheme / Michael James Frew Arrested in Nevada for Wire Fraud, Mail Fraud, and Money Laundering Charges (DOJ Press Release)
Michael James Frew  was indicted in the United States District Court for the Northern District of California on two counts each of wire fraud, mail fraud, and money laundering in connection with allegations that he had fraudulently solicited investments from numerous individuals on the premise that their money would be invested into real estate in the United States and abroad.  The Indictment alleges that Frew diverted the investments to support his personal lifestyle, to speculate on the stock market using an account in his name, and/or to repay other victims a portion of their investments.