[T]he traders, who are primarily based in China, manipulated the prices of thousands of thinly traded securities by creating the false appearance of trading interest and activity in those stocks, thereby enabling them to reap illicit profits by artificially boosting or depressing stock prices. For example, according to the SEC's complaint, the traders used multiple accounts to place several small sell orders to drive down a stock's price before using a different set of accounts to buy larger amounts of the stock at the artificially low prices. After accumulating their position, the traders then flipped the script and placed several small buy orders to push up prices so they could then sell their stock at artificially high prices.
The report reflects key findings and observations identified in recent examinations, and contains effective practices that could help firms improve their compliance and risk management programs. It summarizes findings and observations across a range of topics, including supervision, cybersecurity, best execution, segregation of client assets, and Uniform Transfers to Minors Act (UTMA) and Uniform Grants to Minors Act (UGMA) accounts.This year's report includes two material changes to increase its utility. One, it aims to more clearly delineate between material that is an examination finding, which describes a violation of a rule or regulation, and material that is an examination observation. The latter refers to a suggestion around how firms can improve controls to address perceived weaknesses that elevate risk, but does not typically rise to the level of a rule violation or cannot be tied to a specific rule. And two, this year's report includes a new "Additional Resources" sub-section for most topics, with links to relevant additional information such as Regulatory Notices, topic pages and FAQs.
Sales Practice and SupervisionSupervisionSuitabilityDigital CommunicationAnti-Money Laundering (AML)Uniform Transfers to Minors Act (UTMA) and Uniform Grants to Minors Act (UGMA) AccountsFirm OperationsObservations on CybersecurityBusiness Continuity PlansFixed Income Mark-up DisclosureMarket IntegrityBest ExecutionDirect Market Access ControlsShort SalesFinancial ManagementObservations on Liquidity and Credit Risk ManagementSegregation of Client AssetsNet Capital Calculations
The criminal charges against Merrill stem from the same misconduct alleged in the SEC's complaint, filed on September 13, 2019 in federal district court in Baltimore. From at least 2013 to 2018, Merrill and co-defendant Jay B. Ledford allegedly attracted investors to the Ponzi-like scheme by making false statements about how investors' money would be used and propping up their misstatements through the creation of sham entities and fraudulent documents. Rather than use investor funds to acquire and service debt portfolios as promised, the amended complaint alleges that defendants used the money to make Ponzi-like payments to investors and to fund Merrill's and Ledford's extravagant lifestyles. Ledford and another co-defendant, Cameron R. Jezierski, entered guilty pleas in the parallel criminal case and are awaiting sentencing.
Claimant presented evidence that led the ("TPA") provided the Customer with all the information needed to establish the 401k plan. The Customer's TPA completed the form, secured the Customer's signature, and provided the completed form to Claimant, signed and with all elections made, clearly establishing the CUstomer's plan as a non-discretionary, safe harbor plan. The Customer's TPA made or implemented all decisions regarding the plan.Apart from providing the TPA with the blank 401k standardized adoption agreement, Claimant was not involved in completing the form, establishing plan requirements, or otherwise involved in management or oversight of the plan, nor supervision or oversight of any employee involved with the plan. The Arbitrator concluded, therefore, that Claimant was not involved in any unauthorized third-party trading, forgery, breach, security violation misrepresentation, or failure to supervise.
[F]rom about 2010 to about 2013, he devised a scheme to fraudulently obtain money from people falsely representing that he would use their money for business purposes. As part of the scheme, he influenced victims' decisions by using forged business documents and fictitious emails from banks. Specifically, in February 2011, Zogheib falsely told one of his victims about forming a mobile crane company and a mobile crane leasing company. He claimed he had millions of dollars in an overseas account, but it was placed on a hold. After showing the victim a fictitious bank record showing millions of dollars on deposit, Zogheib's dupe caused the victim into giving him $548,000 to fund the sham companies. From November 2010 to about August 2013, Zogheib defrauded two other victims by falsely claiming he was in the business of flipping real estate. He made false representations to the victims in order to receive hundreds of thousands of dollars for the nonexistent real estate investments. These two victims sent Zogheib a total of $1,307,475. Zogheib immediately used the ill-gotten proceeds to fund his gambling habit and high-end lifestyle.