The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
March 18, 2020
Update on Consolidated Audit Trail; Temporary COVID-19 Staff No-Action Letter; Reducing Cybersecurity Risks (SEC Release)CFTC Provides Relief to Market Participants in Response to COVID-19 (CFTC Release)CFTC Issues Second Wave of Relief to Market Participants in Response to COVID-19 (CFTC Release)FINRA Member Firm and GSP Over Submission of False Statements Per Exempted Securities. In the Matter of Pluris Capital Group, Inc. and John Fletcher, Respondents (FINRA AWC )
JPMorgan Sees Shorts Behind $9 Billion Influx Into S&P ETF (Bloomberg by Katherine Greifeld)
https://www.bloomberg.com/news/articles/2020-03-17/jpmorgan-sees-short-sellers-behind-influx-of-cash-to-s-p-etf
In an intriguing article at Bloomberg.com, Katherine Greifeld reports about suspicions that "create-to-lend" may be creating the false impression that the cash that poured into SPY is from bullish investors. As Greifeld reports in part:
[K]nown as "create-to-lend," new shares are generated in order for investors to borrow and sell short against the fund. That process could explain why the $226 billion SPDR S&P 500 ETF Trust ETF, ticker SPY, took in over $9 billion of new inflows last week, according to JPMorgan Chase & Co. It saw an additional $7.5 billion on Monday alone, Bloomberg data showed.
Update on Consolidated Audit Trail; Temporary COVID-19 Staff No-Action Letter; Reducing Cybersecurity Risks (SEC Release)
https://www.sec.gov/news/public-statement/statement-clayton-cat-covid-19-nal-cybersecurity-2020-03-17
https://www.sec.gov/news/public-statement/statement-clayton-cat-covid-19-nal-cybersecurity-2020-03-17
SEC Chair Clayton states, in part, in the SEC Release:
The consolidated audit trail ("CAT") is intended to enhance regulatory oversight of our securities markets. Our equities and options markets operate through multiple exchanges and other venues and the CAT will facilitate cross-market oversight and analysis, thereby improving investor protection and market integrity. The CAT NMS Plan governing the CAT was approved in November 2016 and required the development of the CAT by FINRA and the national securities exchanges (collectively, the "SROs"). According to the CAT NMS Plan, broker-dealers were to start reporting to the CAT by November 2018. While the SROs were unable to establish an operational CAT by November 2018, the SROs have made progress with respect to testing in advance of broker-dealer reporting including opening the test environment for broker-dealer reporting in December 2019 and continued roll-out of functionality into that environment earlier this year.
CFTC Provides Relief to Market Participants in Response to COVID-19 (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8132-20
https://www.cftc.gov/PressRoom/PressReleases/8132-20
-and-
CFTC Issues Second Wave of Relief to Market Participants in Response to COVID-19 (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8133-20
https://www.cftc.gov/PressRoom/PressReleases/8133-20
In response to the COVID-19 crisis, the CFTC issued 8 Staff No-Action Letters targeting targeted relief to futures commission merchants ("FCMs"), introducing brokers ("IBs"), swap dealers, retail foreign exchange dealers, floor brokers, swap execution facilities ("SEFs"), designated contract markets ("DCMs"), and other market participants. READ:
CFTC DCMs/SEFs Staff Letter 20-02 https://www.cftc.gov/csl/20-02/downloadCFTC FCM/IB Staff Letter 20-03 https://www.cftc.gov/csl/20-03/downloadCFTC Floor Brokers Staff Letter 20-04 https://www.cftc.gov/csl/20-04/downloadCFTC Forex Dealers Staff Letter 20-05 https://www.cftc.gov/csl/20-05/downloadCFTC Swap Dealers Staff Letter 20-06 https://www.cftc.gov/csl/20-06/downloadCFTC SEFs Dealers Staff Letter 20-07 https://www.cftc.gov/csl/20-07/downloadCFTC SEFs Staff Letter 20-08 https://www.cftc.gov/csl/20-08/download
CFTC DCMs Staff Letter 20-09 https://www.cftc.gov/csl/20-09/download
Justice Department Announces Antitrust Civil Process Changes for Pendency of COVID-19 Event / Process Changes Will Ensure that the Department Can Carry Out Its Enforcement Mission While Protecting the Health and Safety of Its Employees and the American Public (DOJ / Antitrust Division Release)
https://www.justice.gov/opa/pr/justice-department-announces-antitrust-civil-process-changes-pendency-covid-19-event
In response to the COVID-19 crisis, DOJ/Antitrust adopted civil-merger investigation procedures. As set forth in part in the DOJ/Antitrust Release:
- For mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests. If circumstances require, the Division may revisit its timing agreements with merging parties in light of further developments.
- The Antitrust Division will allow electronic filing of Hart-Scott-Rodino submissions.
- The Antitrust Division will conduct all meetings by phone or video conference (where possible), absent extenuating circumstances.
- All scheduled depositions temporarily will be postponed and will be rescheduled using secure videoconferencing capabilities.
https://www.justice.gov/usao-or/pr/two-canadian-nationals-sentenced-federal-prison-bitcoin-fraud
Karanjit Singh Khatkar and Jagroop Singh Khatkar each pled guilty in the United States District Court for the District of Oregon to conspiracy to commit wire fraud and money laundering. The Court sentenced each Khatkar to 24 months in prison plus three years of supervised release, and they were ordered to pay $184,511 in restitution of which $142,349 has already been paid. As set forth in part in the DOJ Release:
[B]eginning in October 2017 and continuing until August 2018, the defendants used a Twitter account with the name @HitBTCAssist to trick victims into thinking they were communicating with a customer service representative from HitBTC, a Hong Kong-based online platform used to exchange virtual currency. HitBTC provides its customers with web-based "wallets" to store virtual currency and make transactions.Using the fraudulent Twitter account, the defendants responded to the Oregon victim's questions about withdrawing virtual currency from her HitBTC account. The defendants convinced the victim to send information they could use to log on and take over her email, HitBTC and Kraken accounts. Kraken is a U.S.-based online platform that offers services similar to HitBTC.The defendants initiated transfers of 23.2 bitcoins from the victim's HitBTC account to Karanjit Khatkar's Kraken account. Karanjit Khatkar in turn transferred approximately 11.6 in stolen bitcoins to Jagroop Khatkar's Kraken account.Two days after illegally accessing the victim's account, Karanjit Khatkar bought a Mercedes-Benz with $56,598 in Canadian dollars. The Khatkars also traveled to casinos. Karanjit Khatkar gambled with tens of thousands of dollars while staying at high-end casinos in Las Vegas, Nevada.
FINRA Member Firm and GSP Over Submission of False Statements Per Exempted Securities. In the Matter of Pluris Capital Group, Inc. and John Fletcher, Respondents (FINRA AWC 2018056477801)
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Pluris Capital Group, Inc. and John Fletcher submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.
The AWC alleges that Pluris has been a FINRA member firm since 1992 and employs four registered representatives; and that Fletcher was first registered in 1998, and since September 2016, he was associated with Pluris.
The AWC alleges that Pluris and Fletcher do "not have any relevant disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization."
Under "Overview" in the AWC is the following:
In August 2017, Fletcher, on behalf of Pluris, negligently signed two documents containing false statements Fletcher knew that those documents would be submitted to a court to obtain judicial confirmation that securities issued in exchange for the satisfaction of claims against two companies would be deemed exempted securities under Section 3(aX10) of the Securities Act of 1933 ("Securities Act") and thus generally not subject to the registration requirements of Section 5 of the Securities Act. Respondents' conduct contravened Section 17(a)(2) of the Securities Act, thereby violating F1NRA Rule 2010,From August through October 2017 (the "Relevant Period"), Pluris failed to establish, maintain and enforce a supervisory system, including written supervisory procedures ("WSPs"), reasonably designed to achieve compliance with the registration requirements of Section 5 of the Securities Act, Specifically, Pluris did not implement reasonable systems or written procedures to determine whether securities issued in reliance on Section 3(a)(10) of the Securities Act were exempt from Section 5's registration requirements.. This conduct violated FINRA Rules 3110 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon:
Pluris: a Censure and $20,000 fineFletcher: a $7,500 fine and a two-month suspension from any FINRA member in all capacities.
The Pen Is Mightier Than The Sword But Don't Bring Either Into A FINRA Test Center
(BrokeAndBroker.com Blog)
(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5123/FINRA-Writing-Instruments/
What do you think falls under the term "writing instruments." A pen? A pencil? Is there something else -- something electronic that's a writing instrument. Our publisher Bill Singer is frequently fascinated but such word puzzles. That being said, today's blog considers the case of someone who FINRA fined and suspended for using a writing instrument at a test center.