Securities Industry Commentator by Bill Singer Esq

October 5, 2018
Russian nationals and residents Aleksei Sergeyevich Morenets, Evgenii Mikhaylovich, Serebriakov, van Sergeyevich Yermakov, Artem Andreyevich Malyshev, and Dmitriy Sergeyevich Badin, who were each assigned to Military Unit 26165, and Oleg Mikhaylovich Sotnikov, and Alexey Valerevich Minin, who were also Russian Main Intelligence Directorate (GRU) (a military intelligence agency of the General Staff of the Armed Forces of the Russian Federation+ were indicted in the United States District Court for the District of Pennsylvania for computer hacking, wire fraud, aggravated identity theft, and money laundering. The Indictment alleges that the conspiracy conducted persistent and sophisticated computer intrusions affecting U.S. persons, corporate entities, international organizations, and their respective employees located around the world, based on their strategic interest to the Russian government. The conspiracy publicized stolen information as part of an influence and disinformation campaign designed to undermine, retaliate against, and otherwise delegitimize the efforts of international anti-doping organizations and officials who had publicly exposed a Russian state-sponsored athlete doping program and to damage the reputations of athletes around the world by falsely claiming that such athletes were using banned or performance-enhancing drugs. Each defendant is charged with one count of conspiracy to commit computer fraud and abuse, one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering; and  Defendants Morenets, Serebriakov, Yermakov, Malyshev, and Badin are each also charged with two counts of aggravated identity theft; and  Defendant Yermakov is also charged with five counts of wire fraud, Separately, Defendants Yermakov, Malyshev, and Badin are also charged defendants in federal indictment number CR 18-215 in the District of Columbia, and accused of conspiring to gain unauthorized access into the computers of U.S. persons and entities involved in the 2016 U.S. presidential election, steal documents from those computers, and stage releases of the stolen documents to interfere with the 2016 U.S. presidential election. READ the FULL TEXT Indictment

Musk Trolls the SEC ( video)
I do NOT post the CNBC video below out of agreement or disagreement with Musk's exercise of free speech or with his opinion about the SEC or with the substance of his comment. I posted the segment because it presents a very fair and balanced analysis of the pros and cons (of the wisdom) of C-suite execs using social media to publicize their opinions. My one thought is that this entire incident is a very strong argument in favor of keeping a company private or not going public:
We got a husband stockbroker. We got his wife. We got two family friends who are customers. They both designate the stockbroker as an agent in their health care POAs. The stockbroker's got another friend/customer who designates him as Trust beneficiary. Someone dies. Things get paid. Things don't get disclosed. Forms are not accurately filled in. Things get refunded and re-paid. Brokerage firms and regulators get unhappy. Allegations and accusations get made. Yeah, I know, it all sort of sounds like a Senate confirmation hearing of a proposed Supreme Court Justice. Sort of reminds me of that great Temptations song "Ball of Confusion."

In the Matter of Department of Enforcement, Complainant, vs. Stanley Clayton Niekras, Respondent (Decision, FINRA National Adjudicatory Council, Complaint No. 2013037401001)
After a FINRA Office of Hearing Officers Panel found that FINRA's Department of Enforcement had failed to proved its case, Enforcement appealed the decision to FINRA's National Adjudicatory Council arguing that the OHO Panel's "conclusion that the alleged misrepresentations constituted 'expressions of opinion' that could not form the basis of a misrepresentation violation, and its conclusion that it was unable to assess the materiality of the alleged misrepresentations without testimony from [DP], the customer to whom the alleged misrepresentations were made." FINRA's NAC issued a rare Decision affirming the OHO Panel's dismissal of the Complaint. As explained in the introductory portion of the NAC Decision:

FINRA's Department of Enforcement ("Enforcement") alleged that Stanley Clayton Niekras made misrepresentations to an elderly married couple and their three adult children, in violation of FINRA Rule 2010. The couple, DP, a retired real estate lawyer, and his wife, VP (collectively, the "Ps"), were wealthy, long-time customers and friends of Niekras. After DP gifted each of his children approximately $450,000, Niekras recommended that the children, CLP, DDP, and DVP, each purchase a particular variable annuity. When the children declined to purchase the annuity, Niekras sought payment for his prior services to the Ps, in lieu of the commissions Niekras would have received if the children had purchased the annuity. Although Niekras did not have an investment advisory or financial planning agreement with the Ps, Niekras prepared for them written billing estimates and a draft billing statement for his services. 

Niekras's actions to seek payment underlie Enforcement's allegations that Niekras made misrepresentations to the P family. The Hearing Panel found that Enforcement failed to prove that Niekras made misrepresentations in violation of FINRA Rule 2010. Notably, in the Hearing Panel's view, Enforcement chose not to have either DP or VP testify at the hearing or otherwise participate in the underlying investigation, despite the availability of both. We, like the Hearing Panel, find that the absence of witnesses -- especially DP -- impacts our assessment of the evidence in this case. Based on this record, and the lack of evidence about the surrounding circumstances with respect to the alleged misrepresentations, we find that Enforcement failed to prove its case. Accordingly, we affirm the Hearing Panel's findings and dismiss the underlying

Notwithstanding the NAC's dismissal and very thoughtful Decision, the Panel did feel compelled to make this observation:

Our dismissal of this matter is not an endorsement of Niekras's conduct. Among other things, Niekras violated his firm's procedures about advisory fee agreements; used pressure tactics with clients, including an elderly couple, in an attempt to get paid; and disregarded his firm's directive not to contact his clients during a firm investigation and not to tape conversations without the consent of the other party. We find his conduct problematic. We do not have before us, however, the question of whether Niekras's overall course of conduct was unethical and violated FINRA Rule 2010 because that theory of liability was not alleged. 

Page 20 of the NAC Decision
Christopher Wolf, who operated Rothchild & Associates LLC, was in the business of selling precious metals to investors over the telephone.  Wolf caused the filing of false individual and corporate income tax returns that under-reported his commission income and claimed phony expense deductions, which resulted in about a $240,000 tax loss.Wolf was found guilty of tax evasion and aiding and assisting in the preparation of false tax returns by a jury in the United States District Court for the Eastern District of New York. 

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