Securities Industry Commentator by Bill Singer Esq

Structuring of Eight Bank Deposits Earns FINRA Suspension (BrokeAndBroker.com Blog)

SEC Charges Eight Companies for Failure to Disclose Complete Information on Form NT (SEC Release)

SEC Charges Online Tutoring Company and Its CEO with Fraud (SEC Release)

Albuquerque investment broker indicted for mail and wire fraud, money laundering and failure to file tax returns (DOJ Release)

Former Bookkeeper Pleads Guilty in Federal Court to Embezzling More Than $1,000,000 from Charleston Real Estate Company

Couple sentenced for laundering over $500,000 on behalf of India-based phone scammers (DOJ Release)

FINRA Seeks Comment on Supporting Diversity and Inclusion in the Broker-Dealer Industry / Comment Period Expires: June 28, 2021 (Regulatory Notice 21-17)

FINRA Fear and Wall Street Trembling and The Financial Sickness Unto Death (BrokeAndBroker.com Blog)

PIABA Wants Live FINRA Arbitrations And Wants It Now (BrokeAndBroker.com Blog)

Brokerage Firm's Third-Party Complaint Against Its Former CEO Remanded to FINRA Arbitration (BrokeAndBroker.com Blog)

140 Victims Lost Millions In Investment Using Nanotech to Turn Dirt Into Gold (BrokeAndBroker.com Blog)

The Securities and Exchange Commission today charged eight companies for failing to disclose in SEC Form 12b-25 filings that their request for seeking a delayed quarterly or annual reporting filing was caused by an anticipated restatement or correction of prior financial reporting. The violations were uncovered by an initiative focused on Form 12b-25 filings by companies that quickly thereafter announced financial restatements or corrections. Each of the companies was a public reporting company at the time of the violations and agreed to settle the Commission's charges and pay civil penalties.

Public companies are required to file the SEC's Form 12b-25 "Notification of Late Filing," commonly known as "Form NT," when "not timely" filing a Form 10-Q or Form 10-K and seeking additional days to file their reports. Companies must disclose on the Form NT why their quarterly or annual report could not be filed on time, as well as any anticipated, significant changes in results of operations from the corresponding period for the last fiscal year. The SEC orders find that each of the companies announced restatements or corrections to financial reporting within 4-14 days of their Form NT filings despite failing to provide details disclosing that anticipated restatements or corrections were among the principal reasons for their late filings. The orders also find that the companies failed to disclose on Form NT, as required, that management anticipated a significant change in quarterly income or revenue.

. . .

The SEC's orders find that the below listed companies violated Section 13(a) and Rule 12b-25 under the Securities Exchange Act of 1934 by failing to make the required Form NT disclosures. Without admitting or denying the findings, the companies agreed to cease-and-desist-orders that made the following findings and require payment of the following penalties:

Fortem Resources, Inc. (FTMR) - Filed one deficient Form NT. The British Columbia-based company agreed to pay a penalty of $25,000.

TruTankless, Inc. (TKLS) - Filed one deficient Form NT. The Arizona-based company agreed to pay a penalty of $25,000.

ShiftPixy, Inc. (PIXY) - Filed one deficient Form NT. The Florida-based company agreed to pay a penalty of $25,000.

Rokk3r, Inc. (ROKK) - Filed one deficient Form NT and filed one untimely Form 8-K. The Florida-based company, now private, agreed to pay a penalty of $50,000.

Daniels Corporate Advisory Company, Inc. (DCAC) - Filed one deficient Form NT. The New York-based company agreed to pay a penalty of $25,000.

HQDA Elderly Life Network Corp. (HQDA) - Filed two deficient Forms NT. The California-based company agreed to pay a penalty of $50,000.

Asta Funding, Inc. (ASTA) - Filed one deficient Form NT and filed one Form 10-Q outside the extension period. The New Jersey-based company, now private, agreed to pay a penalty of $50,000.

Igen Networks Corp. (IGEN) - Filed one deficient Form NT. The California-based company agreed to pay a penalty of $25,000.

[D]uring 2017 and 2018, Students of Strength raised over $1 million from more than twenty investors through the sale of common stock and convertible notes. As alleged, King described the company to potential investors as a thriving online tutoring business that connected college student tutors with student customers, and represented that the company needed outside investment to grow and meet the high demand for its services. In fact, the complaint alleges, the company had very few customers and only nominal cash flow. According to the complaint, King made misrepresentations to potential investors about the company's historical revenue and current cash flow; the company's assets and liabilities; the company's operations; and the number of tutors hired and students tutored.

[K]essler allegedly failed to file federal income tax returns for tax years 2014 through 2017. Kessler operated as a financial advisor and investment broker under the business name Guardian Group Investments, LLC. From on or about Feb. 26, 2016, to Aug. 23, 2016, Kessler allegedly used his position to induce investors into providing him access to investment funds that he diverted to his own benefit and use. Kessler allegedly placed investors' funds into a business savings account, which is specifically prohibited by New Mexico securities regulations. On several occasions, Kessler moved funds from that account into his personal checking account.

Kessler allegedly fraudulently converted over $123,000 from four victims. Kessler allegedly did not provide the victims with documentation of their investments that would have shown that their money had not been invested as they were told. Kessler allegedly used money from certain victims to pay others to conceal the fraud.

[F]rom the mid-1990s, Rhett managed and controlled the finances, payroll, and tax preparation for Simmons Realty and all related entities.  During the course of her employment, Rhett engaged in a complex embezzlement scheme - starting by falsifying the business ledgers to move money to her personal accounts and evolving into augmenting her salary, stealing directly from other employee's paychecks, and stealing from the other Simmons Realty related entities. 

According to a review by the Federal Bureau of Investigations (FBI) and the Internal Revenue Service (IRS) of bank records, checks, and other financial documents, including the hard drive Rhett used during the course of her employment, Rhett stole more than $1 million from Simmons Realty Company, its owners, and related entities.  On the hard drive, agents recovered detailed spreadsheets Rhett maintained regarding the amount of money she was stealing, where the money came from, and how she falsified the business ledgers.

In addition to the money stolen with the embezzlement scheme, evidence presented showed that Rhett never reported the income on her taxes and failed to pay more than $380,000 in taxes during the course of the scheme.

Criminal India-based call centers defraud U.S. residents, including the elderly, by misleading victims over the telephone utilizing scams such as Social Security and tech support scams.

As part of their Social Security scam, India-based callers posed as federal agents in order to mislead victims into believing their Social Security numbers were involved in crimes.  Callers threatened arrest and the loss of the victims' assets if the victims did not send money.  The callers directed victims to mail cash to aliases used by other members of the fraud network, including Patel and Dave.

As part of the tech support scam, callers induced victims to send money in exchange for supposed technical support for their computers.  The callers then provided nothing in return.  At times, callers misled the victims into providing remote access to their computers and the callers would access the victims' bank accounts.  The callers routinely misled the victims by making it appear as though the caller added money to the victims' bank accounts.  The callers then instructed the victims to mail cash to aliases used by other members of the fraud network, including Patel and Dave.

Based on misrepresentations made during the calls, the victims, including Georgia residents, mailed money to a network of individuals that laundered funds on behalf of the overseas fraud network.  From on or about May 2019, to on or about January 2020, Patel and Dave laundered over $500,000 sent by dozens of scam victims.

FINRA seeks comment on any aspects of our rules, operations and administrative processes that may create unintended barriers to greater diversity and inclusion in the broker-dealer industry or that might have unintended disparate impacts on those within the industry.  

FINRA requests comment, and if possible, descriptive information, on the following questions:

1. What, if any, FINRA rules or market practices have a disparate impact on individuals in the broker-dealer industry (on the basis of national origin, language, age, gender, race, color, ethnicity, socioeconomic status, religion or spiritual practice, disability, sexual orientation, gender identity, family structure or veteran status) or discourage participation in the broker-dealer industry?
   
   
2. Are there circumstances where FINRA's application of our rules have a disparate impact on individuals in the broker-dealer industry (on the basis of national origin, language, age, gender, race, color, ethnicity, socioeconomic status, religion or spiritual practice, disability, sexual orientation, gender identity, family structure or veteran status) or discourage participation in the broker-dealer industry?
   
   
3. What, if any, FINRA operations and administrative processes have a disparate impact on individuals in the broker-dealer industry (on the basis of national origin, language, age, gender, race, color, ethnicity, socioeconomic status, religion or spiritual practice, disability, sexual orientation, gender identity, family structure or veteran status) or discourage participation in the broker-dealer industry?
   
   
4. Does the current collection and publication of registered representative background data, including that which relates to education, employment status, tenure, and complaints and grievances, create an unintended barrier to greater diversity in the broker-dealer industry?10
   
   
5. Are there additional changes that FINRA could make to its rules, consistent with the scope and limitations of its statutory mandate, to affirmatively foster diversity, inclusion and equal opportunity in the broker-dealer industry?

Please, show me the cases those regulators brought in the past 50 years in which member firms were charged with permitting racial or sexual discrimination/harassment. And what's the message? The regulators unwittingly encourage intolerant behavior by not deeming these practices to be conduct that offends basic notions of "high principles" and "honor." Do the SROs see such conduct as nothing more than an indiscretion? 

Wall Street is no longer a quaint road between a church, on one end, and a river, on the other. It is a metaphor for the entire capitalist world. And that world, which we all live in, is populated with minorities and women. Try as Wall Street has for generations to marginalize those two groups, the fact is now inescapable. The securities markets in the United States are in a battle with international markets. If we don't re-tool our industry to include more minorities and women in meaningful roles, we will inevitably lose out to more enlightened competitors. The NYSE may well become a luxury residential condominium. NASD may well become an off-shore gambling site. I can think of nothing more disgusting than to know that you are capable of doing a job but are denied employment solely based upon conditions of your birth. 

• Securities Industry Commentator
• Bill Singer