Securities Industry Commentator by Bill Singer Esq

May 4, 2018

United States of America, Appellee, v. Jesse C. Litvak, Defendant/Appellant (Opinion, United States Court of Appeals for the Second Circuit, 17-CR-1464 /May 3, 2018) READ FULL TEXT 2Cir Opinion

Appeal from a conviction by a jury in the United States District Court for the District of Connecticut (Janet C. Hall, Chief Judge), on one count of securities fraud. Appellant principally argues that his misstatements were, as a matter of law, immaterial to a reasonable investor in the market for residential mortgage backed securities. We hold that his misstatements could be found by a jury to be material. However, the district court materially erred in admitting evidence that the counterparty representative in the sole transaction underlying the count of conviction mistakenly believed that appellant was his agent. Accordingly, we vacate the judgment of conviction and remand

Three Men Arrested For Scheme To Defraud Elderly Victims In The Sale Of Worthless Stock / Vladimir Ziskind, a/k/a "Mike Palmer," Keith Orlean, a/k/a "Jack Allen," and Kevin Weinzoff, a/k/a "Mike Palmer," Solicited Stock Purchases from Elderly Victims Using Fake Names, False Information, and Bogus Promises of High Returns
(DOJ Press Release)
In a Complaint filed in the United States District Court for the Southern District of New York, federal prosecutors charged Vladimir Ziskind a/k/a "Mike Palmer" and Kevin Weinzoff a/k/a "Mike Palmer" and Keith Orlean a/k/a "Jack Allen" each with  with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud.  The Complaint alleges that a salesman named "Mike Palmer" would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies.  Allegedly, the tips were fabricated and there was no "Mike Palmer," and the salesman was actually Ziskind or Weinzoff. The companies for which the investments were being solicited were allegedly controlled by Ziskind or Weinzoff.  The FBI asserts that since April 2014, the defendants convinced over 50 elderly persons to purchase  over $2 million stock as part of the alleged scheme.READ the FULL TEXT Criminal Complaint.

FINRA Hardship Waiver Hard To Find ( Blog)
After you read today's regulatory case, you may be puzzled. Even after you have digested the facts, you may be unsure whether FINRA is right or its member firm is right -- or maybe they're both wrong. The Blog publisher Bill Singer Esq has read and re-read the underlying documents in a festering dispute involving a FINRA member firm that asked for a hardship waiver of several thousand dollars in arbitration fees. The assessed fees are customary and not particularly excessive. On the other hand, FINRA says it has a "hardship exemption," which might have been appropriately granted when first requested by the member firm. Regardless, we are also asked to confront that old saying that "what's then is then and what's now is now." As we look back from today's vantage point at the mounting legal paperwork and the increasingly larger dollars clicking off on the taxi meter of fees, costs, and expenses running for such appeals, it all seems absurd. Ahhhh . . .  perhaps that's something we can all agree on? 

Antony Lee Turbeville, Appellant, v. Department of Financial Services, Appellee, (Opinion, Florida First District Court of Appeal, No. 1D17-221 / May 3, 2018)
As set forth in the Syllabus to the Florida Court of Appeal Opinion:

Appellant Antony Lee Turbeville challenges a Final Order of the Department of Financial Services revoking Appellant's insurance license, following the Department's finding that Appellant violated section 626.621(13), Florida Statutes (2015). Appellant argues that: (1) the language of section 626.621(13), Florida Statutes, and the penalty guidelines of Florida Administrative Code Rule 69B-231.090(13) (2015) are ambiguous and should be construed in his favor; (2) that the Department's application of rule 69B-231.090(13) constitutes an ex post facto violation; and (3) that the Department's application of the section 626.621(13), Florida Statutes, to licensees of the Financial Industry Regulatory Authority ("FINRA") violates a licensee's constitutional right to remain silent. 

The Florida Court of Appeal concluded that:

FINRA rules and federal court rulings state that if the Extended Hearing Panel's decision is appealed, the decision by the National Adjudicatory Council is FINRA's final action. Thus, the language of section 626.621(13), Florida Statutes, is not ambiguous, and the Department's application of the statute and Florida Administrative Code Rule 69B-231.090(13) is not an ex post facto application. Additionally, because testimony to FINRA is not compelled by State action, the use of testimony in FINRA license-revocation proceedings does not violate the right to remain silent as found in the Fifth Amendment to the United 15 States Constitution and Article I, section 9 of the Florida Constitution. We therefore affirm the Department's final order

For a detailed analysis of Turbeville's regulatory background that served as that basis for the Florida Court of Appeal opinion, read:

Federal Appeals Court Deems FINRA Deputy of the Federal Government ( Blog, November 6, 2017)

On June 12, 2012, Respondents Brookstone, Turbeville, Kline and Locy appealed the OHO Decision to FINRA's National Adjudicatory Council ("NAC"). As set forth in the "Syllabus" to the NAC's 56-page FINRA Department of Enforcement, Complainant, v. Brookstone Securities, Inc., Antony Lee Turbeville, Christopher Dean Kline, and David William Locy, Respondents (NAC Decision, 2007011413501, April 16, 2015):

Firm and registered representatives made unsuitable recommendations and committed fraud; firm and a registered representative violated the content standards applicable to member communications with the public; firm and registered representative failed to review customer discretionary accounts; and firm and registered representatives failed to supervise reasonably the firm's activities. Held, findings and sanctions affirmed

FINRA Schrodinger Cat Is Dead, Alive, and a Zombie ( Blog, November 7, 2017)

The IRS has concluded that when FINRA is acting in a regulatory capacity it is "serving as an agency or instrumentality of the government of the United States."  

The 11Cir Turbeville Order takes things along a similar glide path and deems FINRA to be aDeputy of the federal government.  

In 2Cir Solomon Opinion a self-regulatory-organization is deemed a "private body" immune from the mandate of the Fifth Amendment.  

Is it possible for FINRA to be both a private body and "a corporation serving as an agency or instrumentality of the government of the United States" at the same time? 

Is FINRA a governmental actor or a private organization?

Is that Schrodinger's Cat purring

SEC Seeks Order Requiring Shawn Carter to Comply With Subpoena for Testimony (SEC Litigation Release No. 24131)
The SEC filed a subpoena enforcement action in the United States District Court for the Southern District of New York against Shawn Carter seeking an order directing him to comply with an investigative subpoena for his testimony. The SEC is allegedly investigating potential violations of the federal securities laws related to the financial reporting of New York-based Iconix Brand Group, Inc., which paid Carter more than $200 million to acquire intangible assets associated with Carter's Rocawear apparel brand. In March 2016, Iconix publicly announced a $169 million write down of Rocawear, and in March of this year, Iconix announced a further write down of $34 million.  NOTE: Shawn Carter is also known as "Jay-Z"

Cambridge Hedge Fund Manager Sentenced for Investment Fraud Scheme (DOJ Press Release)
Yasuna J. Murakami was a managing member of investment advisory firms MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Through those two advisory firms, Murakami established and managed hedge funds: the MC2 Capital Partners Fund, MC2 Capital Value Fund, and MC2 Capital Canadian Opportunities Fund. Murakami allegedly diverted millions of dollars of investor funds to business and personal accounts that he controlled and engaged in a Ponzi-like scheme to repay earlier investors' redemption requests. As part of the fraud, Murakami withheld material information and provided falsified account statements and tax documentation in an effort to lull investors into complacency. In a parallel action, the Securities and Exchange Commission filed charges against Murakami and his former business partner, Avi Chiat; and the Massachusetts Securities Division also filed civil fraud charges against Murakami for the same conduct. Following his guilty plea, Murakami was sentenced in the United States District Court for the District of Massachusetts to six years in prison and three years of supervised release; and ordered Murakami to pay $10,520,634 in restitution and forfeit a luxury sports car that was purchased with proceeds of the fraud.