On December 10, 2018, Respondent Marian P. Young, pro se, submitted a subpoena request for documents. Although the subpoena is directed to me and the Secretary of the Securities and Exchange Commission, it is clear from the nature of the documents requested, the requested place of production of the documents, and a prior conversation at a prehearing conference, that Young intended to direct the subpoena to the Division of Enforcement. I have signed the subpoena with that understanding. If this was not Young's intent, she should notify my office and the Division as soon as possible.The Division should make a good faith effort to work with Young in responding to the subpoena. Nevertheless, if the Division wishes to file a motion to quash or modify the subpoena, it must do so by December 19, 2018, given the discovery deadline and the proximity of the holidays. See 17 C.F.R. §§ 201.161(a), .232(e)(1). . .
[M]AY advised the Victims, among other things, that they should use money from those accounts to have ECP, rather than Broker Dealer-1, purchase bonds on their behalf. He further represented that by purchasing bonds through ECP directly, the Victims could avoid transaction fees. Because MAY lacked the authority to withdraw money directly from the Victims' accounts with Broker Dealer-1, he persuaded the Victims to withdraw the money themselves and to forward that money to an ECP "custodial" account (the "ECP Custodial Account"), so that he could use the money to purchase bonds on their behalf.With the assistance of his co-conspirator ("CC-1"), MAY guided the Victims, first, to withdraw their money from their Broker Dealer-1 accounts, and second, to send that money to the ECP Custodial Account by wire transfer or check. At times, MAY falsely represented that the funds being withdrawn from Victims' Broker Dealer-1 accounts were the proceeds of prior bond purchases MAY had made. After the Victims sent their money to the ECP Custodial Account, MAY did not use the money to purchase bonds. Instead, MAY and CC-1 spent the money on business expenses, personal expenses, and to make payments to certain Victims in order to perpetuate the scheme and conceal the fraud.Specifically, in some cases, MAY used Victims' funds to make purported bond interest payments to other Victims. In other cases, MAY used Victims' funds to make payments to other Victims who wished to withdraw funds from their accounts. MAY and CC-1 also created phony "consolidated" account statements that they issued through ECP and sent to the Victims. These "consolidated" account statements purported to reflect the Victims' total portfolio balances and included the names of bonds MAY falsely represented that he purchased for the Victims and the amounts of interest the Victims were supposedly earning on the bonds. In order to create the phony consolidated account statements, MAY provided CC-1 with bond names and false interest earnings, and CC-1 created ECP computerized account statements and had them distributed to the Victims.To keep track of the money that the co-conspirators were taking from the Victims, CC-1 processed the Victims' payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how MAY and CC-1 received and spent the Victims' stolen money. In this way, from the late 1990's through March 9, 2018, MAY and CC-1 induced Victims to forward them more than $11,400,000.
[I]n approximately November 2013, Marin and other accomplices arranged to secretly obtain a controlling interest in VLBI stock by issuing shares to certain third parties, including Green Tree Capital, Inc., a company controlled by Marin and Capuozzo, based in Ft. Lauderdale, Florida.Fisher, formerly a practicing lawyer licensed to practice in Florida and New York, was a securities lawyer based in Boca Raton who allegedly became involved with the manipulation of VLBI shares at the invitation of Marin. Fisher allegedly executed various false and fraudulent documents to facilitate the scheme, including certain legal opinion letters that falsely indicated that shares controlled by Marin and other conspirators, were not in fact owned or controlled by "affiliates" of the companies. Such letters allowed shares of VLBI to be falsely classified as "free trading" and thus sold to the public, when in reality that were restricted. In March and April, 2014, Marin, Fisher, Capuozzo, Spierdowis, and other conspirators arranged to transfer a substantial number of shares into brokerage accounts in the name of fictitious entities, but in reality controlled by the conspirators. In addition, according to court documents, Fisher, Capuozzo and other conspirators knew that Marin was a convicted felon and attempted to conceal his role in the scheme by keeping his name off of corporate documents. To facilitate the concealment of Marin's role, Capuozzo became the listed owner of an entity that held Marin's VLBI shares and traded the shares at the direction of Marin. Capuozzo also served as the nominee Chief Executive Officer of VLBI, while acting at the direction of Marin and the conspirators.Thereafter, beginning in approximately May 2014 and continuing through in or around September 2014, Marin, Fisher, Capuozzo, Spierdowis, and others arranged for VLBI to issue rosy press releases, while also using internet marketing and penny stock newsletters to tout VLBI stock. These efforts were intended to artificially increase the trading volume and price of VLBI shares, so that Marin, Fisher, Capuozzo, Spierdowis and their co-conspirators could secretly sell shares at a profit. During the conspiracy period, the conspirators sold approximately $1 million worth of VLBI shares to the investing public.In approximately June 2014, Marin began a term of federal imprisonment due to a different federal offense, and was ultimately incarcerated at FCI Miami. While Marin was at FCI Miami, Fisher, Capuozzo, Spierdowis, and others continued the stock manipulation scheme, while keeping a larger portion of the trading profits for themselves. The conspirators continued to sell shares of VLBI, while continuing the same pattern of issuing press releases and engaging in coordinated sales of shares, until approximately April 26, 2016, when trading in VLBI shares was suspended by the U.S. Securities and Exchange Commission (SEC). . .
(1) disclosures on sustainability and environmental, social, and governance (ESG) topics, and (2) unpaid arbitration awards. These are issues that I have been thinking about as I focus on ensuring that the Commission carries out its mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. . .
[W]hen investors believe they have been harmed by a broker-dealer, they generally must go through the FINRA arbitration process to make their claim. Unfortunately, even if a retail customer wins their arbitration, they may not get their damages award. In 2016, 27% of cases where damages were awarded remained unpaid. In dollar terms, investors were unable to recover $14 million that had been awarded to them in the arbitration process. Fortunately, the dollar amount of awards going unpaid is decreasing. For instance, in 2013 there was $75 million in unpaid awards, in 2014 there was $23 million, and in 2015 there was $24 million. This is good news, but we still have a ways to go. I am very interested in hearing everyone's best thoughts today on how to continue to improve this process. It is of vital importance to both retail investors and to the broker-dealers who have not broken the rules.
Bill Singer's Comment: I have long advocated for the creation by FINRA of an Anti-Fraud Fund by which public customer's arbitration awards would be guaranteed. As I noted, in part, in "Bill Singer Submits Rare FINRA Comment" (BrokeAndBroker.com Blog, June 1, 2017) http://www.brokeandbroker.com/3487/finra-comment-singer/:
As part of reimagining the SRO into a more expansive PSRO . . . FINRA should establish an Anti-Fraud Fund whereby all defrauded public customers would obtain restitution in the event that member firms or associated persons fail to timely honor any awards for compensatory damages, costs, and fees. Finally, I would abolish mandatory arbitration for customers and associated persons.
[W]hether concentrated common ownership has led to weakened competition can and should be debated. What is not debatable, however, is that we are at a pivotal moment in financial history when corporate elections are increasingly decided by a handful of powerful index fund managers. That concentration of power is an urgent corporate governance challenge of our time.Unfortunately, the SEC's current rules leave investors largely in the dark about how these institutions are voting the shares that underlie American families' savings. That's why I'm here today to call on my colleagues at the SEC to pursue rules that will take advantage of existing data on institutional voting to empower investors with better information as to how their shares are voted in the elections that will determine the future of American capitalism.