Securities Industry Commentator by Bill Singer Esq

August 28, 2018

Legg Mason Charged With Violating the FCPA (SEC Release 2018-1680)
The SEC alleged that between 2004 and 2010, a former Legg Mason Inc's asset management subsidiary, Permal Group Inc., partnered with a French financial services company to solicit investment business from Libyan state-owned financial institutions. As a result of the corrupt scheme involving bribery, Legg Mason, through its Permal subsidiary, was awarded business tied to $1 billion of investments that produced about $31.6 million net revenues Pursuant to an SEC Order, Legg Mason agreed to disgorge approximately $27.6 million of ill-gotten gains plus $6.9 million in prejudgment interest to settle the SEC's case. Previously, the firm agreed to pay $33 million to the U.S. Department of Justice in sanctions resulting from the firm's involvement in the Libyan bribery scheme.  READ the FULL TEXT ORDER

Statement on Status of the Consolidated Audit Trail (Brett Redfearn, Director, SEC Division of Trading and Markets) Director Redfearn warns, in part, that: To date, the SROs have not begun reporting required data to the CAT as required by the first phase of the SRO CAT Plan.  There continue to be delays in the SROs' development and build of the CAT, and, recently, the SROs and Thesys have missed new, self-imposed deadlines.  The SROs' currently expected timetable for compliance with their obligations under the CAT Plan is discussed below.  READ the FULL TEXT STATEMENT
There's poetic license and there's your driver's license. Of course, we all know folks who sort of take liberties at the MVA with facts such as whether they really, really, really need glasses to drive. We also know folks who may add just a teeny, tiny inch or so to their height when filling out the renewal form. Then there are those who simply aren't willing to go under the knife for plastic surgery and prefer to estimate the year of their birth. Not that it's a good thing to lie on your driver's license but, hell, it's not a good thing when they send you to the window under the green light to pay the fee and after about 20 minutes waiting on that line, the MVA employee closes the window for a break and sends you to the line behind the other green light where they won't take you next even though you were waiting for, what is now, like 30 minutes, and then they start in with the thing about lowering your voice, and then it's I'm done talking to you, and if you don't move away from my closed window, I'm calling security, to which, the guy waiting on line who is now red in the face and with trembling hands says to the security guard, yeah, go ahead, put your hands on me again and I'll show you what I'll do with that green light! But, okay, sure, let's not get into that whole MVA line-thing now because today's Blog is about the consequences faced by a stockbroker who lied about her date of birth on her driver's license.
The SEC alleged that investors put billions of dollars into mutual funds and strategies using faulty models developed by investment adviser AEGON USA Investment Management LLC (AUIM). AUIM, its affiliated investment advisers Transamerica Asset Management Inc. (TAM) and Transamerica Financial Advisors Inc., and its affiliated broker-dealer Transamerica Capital Inc., claimed that investment decisions would be based on AUIM's quantitative models. In fact, the models were purportedly developed solely by an inexperienced, junior AUIM analyst. Further, the SEC alleged that the models contained numerous errors, and did not work as promised. When AUIM and TAM learned about the errors, they allegedly stopped using the models without telling investors or disclosing the errors. Without admitting or denying the SEC's findings, four Transamerica entities agreed to settle the SEC's charges and pay nearly $53.3 million in disgorgement, $8 million in interest, and a $36.3 million penalty, and will create and administer a fair fund to distribute the entire $97.6 million to affected investors. In separate orders, the SEC also found that AUIM's former Global Chief Investment Officer, Bradley Beman, and AUIM's former Director of New Initiatives, Kevin Giles, each were a cause of certain of AUIM's violations. In particular, the Commission found that Mr. Beman did not take reasonable steps to make sure the mutual funds' models worked as intended and that Mr. Beman and Mr. Giles both contributed to AUIM's compliance failings related to the development and use of models. Beman and Giles agreed to settle the SEC's charges without admitting or denying the findings and pay, respectively, $65,000 and $25,000 in penalties that also will be distributed to affected investors. 
Transamerica Order; 
Beman Order; and 
Giles Order

FINRA Dept of Enforcement, Complainant, v. David JC Bolton, Respondent (Default Decision, Office of Hearing Officer, Disciplinary Proceeding No. 2016049775701)
FINRA Complaint alleged that Respondent Bolton engaged in unsuitable short-term trading of Class A mutual fund shares in the accounts of his two largest customers, and unsuitably split one of the customer's mutual fund investments into 42 different funds across 11 fund families. Bolton's customers allegedly paid $24,747 in unnecessary sales charges. In connection with the same two customers, the Complaint alleged that Bolton caused his member firm employer to maintain inaccurate books and records by mismarking or causing others to mismark as "unsolicited" 120 electronic order tickets. Finally, the Complaint alleged that Bolton caused his firm employer to fail to preserve accurate books and records by taking the files of his customers with him when he transferred to another firm and later destroyed those files. Respondent is barred from associating with any FINRA member firm in any capacity for having caused a member firm to maintain inaccurate books and records and caused a member firm to fail to preserve books and records.

Thousand Oaks Man Sentenced to Nearly Five Years in Federal Prison in $11 Million Bank Fraud Case (DOJ Release)
Mohsen Hass a/k/  "Mike Hass" and "Mohsen Hassanshahi," pled guilty in the United States District  for the Central District of California to one count of making false statements to a financial institution in connection with his fraudulent scheme by which he obtained over $11 million in loan to buy a gas station and two car washes. Lenders suffered losses when Hass defaulted on the loans. At least one bank insider, Ataollah Aminpour, participated in the scheme and allowed loans to go through despite knowing about the false information. Aminpour pled guilty and is pending sentencing. Although initially charged in 2014, Hass fled to Iran for nearly four years before surrendering in February 2018.  Hass was sentenced to 57 months in prison and ordered to pay $5,737,585 in restitution.