Securities Industry Commentator by Bill Singer Esq.

November 30, 2017

SEC: Ramapo, RLDC Consent to Court-Appointed Independent Consultant Among Other Undertakings (SEC Litigation Release 23997)
 Pursuant to a Consent Judgment in Securities and Exchange Commission v. Town of Ramapo, et al.,(United States District Court for the Southern District of New York, 16-cv-2779) the Town and the Ramapo Local Development Corp. ("RLDC") are enjoined from further violations of the '34 Act and subject to the following undertakings as set forth in the SEC Press Release:

(a) requiring the Town and RLDC to retain an independent consultant (IC) with municipal finance experience appointed by the Court to review and recommend improvements to the Town's and RLDC's financial reporting procedures and controls, as well as the Town's and RLDC's municipal securities offerings disclosure policies and procedures, to require the Town and RLDC to adopt any such recommendations, and for the IC to review and assess the sufficiency of the Town's and RLDC's implementation of the IC's recommendations for two full fiscal years thereafter; (b) requiring the Town and RLDC, for fiscal years 2017, 2018, and 2019, to retain an Independent Auditing Firm, not unacceptable to the SEC staff, to conduct audits of the Town's and the RLDC's annual financial statements for those fiscal years; and (c) requiring that, for a period of three years from the date of the entry of the Judgment, the Town and RLDC may not participate in the offer and sale of any municipal securities for which the Town and RLDC are issuers or obligated persons unless the Town and RLDC have, prior to each such offering retained an Independent Disclosure Counsel (IDC) not unacceptable to the SEC staff and which are also unaffiliated with the bond counsel retained for such offering. The IDC shall participate in the preparation of the disclosure document for the offering, assist the Town and RLDC in performing a reasonable investigation concerning the accuracy and completeness of that disclosure document, and render an opinion to the effect that, during its work, nothing came to its attention that would cause it to believe that the disclosure document contains, as of the date of the opinion, any untrue statement of a material fact or omits to state any material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, including the disclosure therein of the terms of the Judgment in this case.

Czar Entertainment Founder James Rosemond Convicted In Manhattan Federal Court For Ordering The Murder Of Lowell Fletcher (DOJ Press Release)
As lurid as the headlines about business on Wall Street may become, we tend to forget that the misdeeds of the securities industry often pale in connection with those of other business sectors. If you think things get nasty on the Street, you should consider a recent federal murder trial involving the music biz. After a nine-day trial in the United States District Court for the District of New York, James Rosemond a/k/a/ "Jimmy the Henchman" was found guilty of one count of substantive murder-for-hire, one count of conspiracy to commit murder-for-hire, and two firearms counts in connection with the murder of Lowell Fletcher, a/k/a "Lodi Mack." The path to conviction was not a straight one. Rosemond's first trial in 2014 ended with the jury unable to reach a verdict on the murder-for-hire. The second 2014 trial ended with a conviction on all counts but was overturned in 2016 by the United States Court of Appeals for the Second Circuit based, in part, on Rosemond's contention that he was barred from raising the defense that although he had ordered hit-men to shoot Fletcher, he did not intend for the shooting to result in Fletcher's death. As set forth in part in the DOJ Press Release:

JAMES ROSEMOND was the founder of Czar Entertainment, a rap music management company, and also the head of a large-scale cocaine trafficking organization.  In March 2007, members and associates of a rival rap music group known as "G-Unit," including Marvin Bernard, a/k/a "Tony Yayo," and Lowell Fletcher, a/k/a "Lodi Mack," assaulted ROSEMOND's son.  ROSEMOND's son was not seriously injured in the assault, and Fletcher ended up serving prison time for his involvement in the assault.  Nevertheless, in 2009, ROSEMOND recruited a crew of men to murder Fletcher upon his release from prison by promising at least $30,000 in payment for killing Fletcher.  At ROSEMOND's direction, members of the murder crew selected a dark and secluded location for the murder in the vicinity of Mount Eden and Jerome Avenues in the Bronx, and lured Fletcher to that spot.  When Fletcher arrived there in the evening on September 27, 2009, a member of the murder crew stepped out of the shadows and fired five bullets into Fletcher's back and arms using ROSEMOND's .22 caliber handgun with a silencer.  Fletcher died later that night.  On October 2, 2009, ROSEMOND had a trusted employee of his cocaine organization provide a kilogram of cocaine - worth about $30,000 in street value - to a member of his murder crew as payment for the murder. 

In the Matter of Lynn Tilton; Patriarch Partners, LLC,; Patriarch Partners VIII, LL; Patriarch Partners XIV LLC; And Patriarch Partners XV LLC, Respondents (Notice of Finality; Invest. Adv. Act Rel No.4815, Invest. Co. Act. Rel. No. 62926; Admin. Proc. File 3-16462 / November 28, 2017).
On September 27, 2017, SEC ALJ Foelak issued In the Matter of Lynn Tilton; Patriarch Partners, LLC,; Patriarch Partners VIII, LL; Patriarch Partners XIV, LLC; And Patriarch Partners XV, LLC, Respondents (Initial Decision; Init. Dec. Rel. No. 1182; Admin. Proc. File 3-16462 / September 27, 2017), which dismissed all charges and, in pertinent part, stated that:

In applying the law to the facts of the instant case, it must be emphasized that the trustee reports and financial statements were not publicly available, unlike financial statements of a public issuer in the issuer's periodic reports published on the Commission's website. Rather, pursuant to the Funds' indentures, they were made available to the noteholders, the trustee, and a limited group of entities. The investors and potential investors in the Funds were Qualified Institutional Buyers and Qualified Purchasers, such as Barclays, SEI Investments, Varde Partners, and MBIA; not, in the words of Commission Chairman Jay Clayton, "Mr. and Ms. 401(k)."61 While there may have been an information asymmetry between Tilton and the noteholders, there was not a power asymmetry.62 While Respondents did not maximize the ease of finding it, they also did not conceal - omit to state - material information such as the amount of interest actually being paid and the interest rate and principal on the Portfolio Companies' loans. This material information underlies the alleged miscategorization of loans and consequent OC Ratio Test in the trustee reports and is related to the alleged improper valuation of assets in the financial statements. 

In the Matter of Lynn Tilton; Patriarch Partners, LLC,; Patriarch Partners VIII, LL; Patriarch Partners XIV LLC; And Patriarch Partners XV LLC, Respondents (Notice of Finality; Invest. Adv. Act Rel No.4815, Invest. Co. Act. Rel. No. 62926; Admin. Proc. File 3-16462 / November 28, 2017), the time to petition for review having expired without submission, the Initial Decision has become the final decision with respect to Lynn Tilton, Patriarch Partners, LLC, Patriarch Partners VIII, LLC, Patriarch Partners XIV, LLC, and Patriarch Partners XV, LLC. Accordingly, the administrative proceeding is dismissed. READ:"BREAKING NEWS: SEC Loses Dramatic CLO Case Against Tilton And Zohar" ( Blog, September 27, 2017).

FINRA Arbitrator Gets By With A Little Help Of A Friend

Another day and another lawsuit over a variable annuity. In today's offering, we have an interesting wrinkle involving a minor who was named as the beneficiary of a VA and a registered representative who may not have timely submitted the paperwork to effectuate the beneficiary designation. Frankly, it's not really clear as to why a lawsuit was even needed to resolve the dispute but, hey, I'm a lawyer and, you know, what good is being a lawyer if folks don't have to pay for my services. READ