Securities Industry Commentator by Bill Singer Esq

August 8, 2018

Former Convergex Global Markets CEO Pleads Guilty in New Jersey for Role in Securities and Wire Fraud Scheme (DOJ Press Release)
Former ConvergEx Global Markets Limited (CGM Limited) Chief Executive Officer Anthony Blumberg pled guilty in the United States District Court for the District of New Jersey to one count of conspiracy to commit securities and wire fraud.  As set forth in part in the DOJ Press Release:

[B]lumberg admitted that clients placed orders to buy or sell securities with G-Trade Services LLC and ConvergEx Limited, subsidiaries of ConvergEx Group that offered global trading services to clients, which in turn routed orders to CGM Limited.  Blumberg also admitted that traders at CGM Limited executed the orders and sometimes added a "spread," (a mark-down on the sale of a security or a mark-up on the purchase of a security) to the prices they had obtained for non-fiduciary clients.  To hide the fact that spread had been taken, on several occasions from 2007 to 2011, Blumberg and traders acting under his direction, acting in response to requests by clients for information that could reveal the existence of spread, sent false reports (known as time and sales reports) to these clients.  The false time and sales reports contained fabricated details regarding the individual transactions, or "fills," executed during the course of a day to complete a client's orders, including false information concerning the number of shares involved in a fill, the time at which the fill was executed, and the price at which shares were either purchased or sold.

Blumberg also admitted that he and his co-conspirators agreed to violate a client's instructions to provide real-time transactional data through an immediate data feed with details of trades that CGM Limited executed for the client by providing "batch fills" that hid the actual information the client sought. 

Blumberg is the fourth individual to plead guilty as a result of the investigation into ConvergEx Group and CGM Limited's practices.  On Dec. 18, 2013, CGM Limited pleaded guilty to conspiracy to commit securities and wire fraud before Judge Linares.  On the same day, ConvergEx Group entered into a deferred prosecution agreement.  Collectively, the two ConvergEx entities paid $43.8 million in criminal penalties and restitution.

SEC Broker Standards Rule Falls Far Short (Press Release, Americans for Financial Reform) READ the FULL TEXT AFR Memo, which states, in part:

In today's Washington, many financial regulators are steering full-tilt toward deregulation, tearing down rules put in place after the 2008 financial crisis, and leaving the public at greater risk of abuse. The SEC proposal, too, would leave investors at continuing risk. SEC Chairman Jay Clayton himself said the goal of the rule is "to bring the standard of conduct in line with what an investor would expect." Investors would expect that their broker is obliged to act in their best interests, full stop. But that's not what the SEC has proposed. It needs to do a lot better. 

The Greek Yogurt Justice Of Strained FINRA Mercy ( Blog)
When the Blog's publisher, Bill Singer, read today's featured FINRA regulatory settlement, he wasn't a happy camper. The underlying facts didn't seem to warrant FINRA's imposition of a fine and suspension -- particularly since the respondent was essentially an industry rookie. And then Bill re-read FINRA's AWC. And then he did some research. And then he followed down a few leads. And then Bill did a 180 degree turn, which isn't an easy spin for him because he has two artificial hips. Regardless of the degree of difficulty, Bill did a complete reversal of direction and came around to accept FINRA's sanctions. After Bill was done changing course and agreeing with FINRA, he couldn't stop thinking about greek yogurt. On top of that, Bill couldn't stop humming Marvin Gaye's catchy tune "Mercy Mercy Me (the Ecology);" and being that Bill's in a generous mood today, he embedded into today's blog a video of a live performance of the tune by Marvin Gaye. 

SEC Charges Cloud Communications Company and Two Senior Executives With Misleading Revenue Projections (SEC Release 2018-150)
Without admitting or denying the findings, Sonus Networks Inc. (post-merger conducts business as Ribbon Communications Inc.), its former Chief Financial Officer Mark Greenquist and Vice President of Global Sales Michael Swade consented to the entry of an SEC Order, which found that they violated Section 17(a)(2) of the Securities Act of 1933, and that Ribbon violated, and Greenquist and Swade caused Ribbon's violations of, the reporting provisions of the Securities Exchange Act of 1934, and ordered Ribbon, Greenquist and Swade to pay penalties of $1.9 million, $30,000, and $40,000 respectively. The SEC alleged that Greenquist, was aware of red flags which undermined the company's first quarter 2015 revenue estimates; and that such warnings included the company having pulled forward deals initially projected to close in 2015 in order to achieve its fourth quarter 2014 revenue guidance.  The company issued guidance of $74 million which reflected certain forecasted sales that had been improperly reclassified, due to pressure from Swade. Subsequently, before the quarter's close, Sonus announced that it was lowering its first quarter revenue estimate to between $47 million and $50 million.  Following this announcement, Sonus's stock price dropped over 33 percent.
READ the FULL TEXT SEC Order. In the first action taken under Texas new law protecting elderly and vulnerable adults who may be the victim of financial scamse, the Texas State Securities Board (TSSB) entered an Emergency Cease and Desist Order against a computer repairman who transferred $27,000 from a financial account of an 88-year-old. The alleged elderly victim ;purportedly hired Mike Chamley to fix his computer. Shortly after they met, Chamley allegedly began trading securities in the elderly client's account, and Chamley allegedly promising to split trading profits. Earlier this year, Chamley was added as a co-account holder to the edlerly custoer's credit union account. TSSB alleges that from mid-March to mid-July, $27,853 was withdrawn via 16 fund transfers from the elderly man's securities account without his knowledge, and, as of July 25, $30 remained in the credit union account. On July 25, the securities dealer where the elderly man's account is held filed a report detailing suspected exploitation. Also, the dealer temporarily blocked online trading in the securities account and the withdrawal of funds from the account. Chamley has 31 days to contest the order before the State Office of Administrative Hearings.

Comment from Bill Singer: Now that's what effective, pre-emptive securities-industry regulation should look like! Note that TSSB has moved on concerns involving alleged misconduct transpiring in 2018, and has done so in an aggressive and effective manner. Far too often, what we see coming out of such Wall Street regulators as the SEC and FINRA is belated, after-the-fact, after-the-harm regulation. In fairness to both the SEC and FINRA, under SEC Chair Clayton and FINRA CEO Cook, the battleships seem to be slowly turning to more pre-emptive efforts with some altered protocols favoring enhanced regulation on behalf of those most vulnerable and most devastated by financial fraud. Unfortunately, given the long histories of often desultory regulation, both the SEC and FINRA have a long way to go before they reach the level of TSSB. I  have long complimented the unique and effective regulatory efforts of TSSB and will continue to do so. Absolutely fabulous work!

Until last summer, FINRA had two distinct enforcement teams. One enforcement group that was historically part of the Department of Market Regulation handled disciplinary actions related to trading-based matters found through Market Regulation's surveillance and examination programs; and a separate enforcement group handled cases referred from other regulatory oversight divisions including Member Regulation, Corporate Financing, the Office of Fraud Detection and Market Intelligence, and Advertising Regulation. As part of FINRA360, stakeholders raised concerns that these dual programs sometimes resulted in duplication of effort and inconsistency of results. As a result, in July 2017, FINRA announced its plan to consolidate its existing enforcement functions into a unified Department of Enforcement. On July 26, 2018, FINRA announced that it had completed the final phase of this consolidation.The unified structure is intended to improve FINRA's ability to streamline investigations, share information, enhance consistency and maximize resources to protect investors and the markets.  

If you are moved by a burning passion for all things Wall Street regulatory, you may wish to shower the SEC with your comments on the proposed FINRA reorganization as follows:

Electronic Comments:
    • Use the Commission's Internet comment form (; or
    • Send an e-mail to Please include File Number SR-FINRA2018-027 on the subject line.
Paper Comments: 
    • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2018-027. This file number should be
included on the subject line if e-mail is used. To help the Commission process and review your
comments more efficiently, please use only one method.