Securities Industry Commentator by Bill Singer Esq

May 31, 2018
The SEC charged Steven Pagartanis in the United States District Court for the Eastern District of New York with The violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;. The SEC sought a judgment ordering Pagartanis to disgorge his ill-gotten gains plus prejudgment interest, and to pay financial penalties. The Complaint alleges that Pagartanis, formerly affiliated with a registered broker-dealer, promised investors that he would invest their funds in either a publicly-traded or private land development company, and that their investment would be safe and would pay guaranteed monthly interest. The Complaint alleges that Pagartanis raised about $8 million, which he used to pay personal expenses and make Ponzi-like guaranteed "interest" payments to his customers. The Suffolk County District Attorney's Office today filed criminal charges against Pagartanis.READ THE FULL TEXT SEC Complaint

FINRA Settles UIT And Instant Messaging Case ( Blog) Blog readers know that our publisher Bill Singer Esq. is no fan of self-regulation or of Wall Street's leading self-regulatory-organization, the Financial Industry Regulatory Authority. Bill's critiques, criticisms, concerns, and reservations aside, today is a rare day for the pages of the Blog because Bill does not come to bury FINRA but to praise it!  A recent FINRA AWC regulatory settlement shows how self-regulation should work and also shows how FINRA is capable of rising to the occasion. At issue in the settlement is a member firm's handling of sales of unit investment trusts and an electronic messaging system. Not the most exciting of regulatory and compliance issues but certainly the day-to-day stuff of Wall Street regulation and compliance. FINRA published a settlement document that uses plain English to explain the background and underlying events. Thereafter, FINRA builds a compelling case and justifies its sanctions, which are measured and appropriate. Maybe FINRA CEO Robert Cook is slowly turning the battleship of self-regulation? Alas . . . only time will tell. Be that as it may, Bill urges all serious investors and industry professionals to read today's analysis of FINRA's settlement.

In the Matter of the Continued Membership of Windsor Street Capital, L.P. (f/k/a Meyers Associates, L.P.) (FINRA NAC, SD-2172 / May 14, 2018)
As set forth under the heading "Introduction" in FINRA's National Adjudicatory Council's ("NAC's") Decision:

On September 7, 2017, Windsor Street Capital, L.P. (f/k/a Meyers Associates, L.P.) (the "Firm") filed a Membership Continuance Application ("MC-400A" or "the Application") with FINRA's Department of Registration and Disclosure ("RAD"). The Application requests that FINRA permit the Firm to continue its membership in FINRA notwithstanding its statutory disqualification . . .

After a careful review of the record, we find that the Firm has not met its burden of demonstrating that its continued membership in FINRA is in the public interest. Specifically, we find that the Firm: (1) has failed to comply with the terms of its disqualifying order; (2) failed to propose a meaningful plan to help ensure that it does not engage in misconduct going forward; (3) proposed inadequate principals and supervisors to oversee the Firm's future compliance with securities rules and regulations; and (4) has not demonstrated that it is able to comply with securities rules and regulations going forward. The Firm's continued participation in the securities industry presents an unreasonable risk of harm to the market and investors, and we therefore deny the Firm's Application.  

On May 17, 2018, Windsor Street filed an appeal of FINRA's Decision with the SEC and sought a 45-day stay of the self-regulatory-organization's denial of the firm's membership continuance in order to allow the firm to wind down its activities. FINRA opposed the delay. In the Matter of the Application of Windsor Street Capital, L.P. For Review of Action Taken by FINRA (Order Denying Stay, '34 Act Rel. No. 83340; Admin. Proc. File No. 3-18494 / May 29, 2018) 
In denying Windsor's request for a stay, the SEC set forth the following four-part test, which is deemed that Windsor had not satisfied [Ed: footnotes omitted]:

In deciding whether to grant a stay under Rule of Practice 401, the Commission considers: (i) the likelihood that the moving party will eventually succeed on the merits of the appeal; (ii) whether the moving party will suffer irreparable harm without a stay; (iii) whether another party will suffer substantial harm as a result of a stay; and (iv) the public interest. Because the first two factors are the most critical, an applicant's failure to demonstrate any likelihood of success or irreparable harm ordinarily will be dispositive."Indeed, recent decisions from the courts of appeals suggest that the failure to show a strong likelihood of success or irreparable harm eliminates the need to balance the other factors." And even under the view that a stay may be granted absent a showing of a strong likelihood of success, the movant must at least show that it has "raised a ‘serious legal question' on the merits." The movant would also have to show "that the other factors weigh heavily in its favor."