Securities Industry Commentator by Bill Singer Esq

November 6, 2018

Why would you risk your savings gambling on stocks on Wall Street when there's a no-can-lose way to make money from casinos and credit card companies? For the answer to that intriguing question:
According to an Indictment filed in the United States District Court for the Eastern District of California, between August 2008 and August 2014, Vivian Wang conspired with Frank Luo in a scheme that used false identities in the names and Social Security numbers of migrant workers to apply for casino cash advances ("markers") and to open credit card accounts. Initially, Wang and Luo timely repaid several markers at different casinos and several credit cards in order to give the impression of creditworthiness; and, thereafter, they recruited "clients" to induce the casinos and credit card companies to extend more credit. The conspirators coordinated their gambling activity to give the appearance of losing money in order to induce the issuance of markers; however, in reality, the conspiracy the losses were offset by gains. Ultimately, the conspirators did not repay the casino markers or the significant outstanding credit card balances prompting over $1.1 million in losses to casinos and credit card companies. Wang and Luo pled guilty to wire fraud (and Wang also pled to  aggravated identity theft) and they were sentenced, respectively, to two years and three years in prison. READ the Indictment

Slam Dunk Insider Trading Case Rejected by 2nd Circuit
United States of America, Appellee, v. Sean Stewart, Defendant/Appellant (Opinion, United States Court of Appeals for the Second Circuit; 17-593) In an odd twist on the old Insider Trading theme, we have a son, Defendant Sean Stewart, who was a JP Morgan Chase analyst and subsequently worked for investment bank Perella Weinberg Partners. Defendant Stewart allegedly gave his father, Robert Stewart, inside information. In fact, Defendant Stewart admitted that "he was very close to his father, routinely confided in him, and even occasionally mentioned potential deals," and that his father and others then invested based upon that information. Notwithstanding the tips, Defendant Stewart argued that he did not know that his father would trade on the information. Sure, that explanation may arch an eyebrow or two as a response but consider this Q&A conducted by the Federal Bureau of Investigation during its investigation following Robert's arrest for alleged insider trading:

FBI: [H]ow do you explain a comment you made to Rick [Cunniffe], that Sean got angry with you when he gave you this information on a silver platter and you didn't invest. 

Robert: I think I was just saying to Rick because Sean said, "Uh y'know, all these deals-if you were trading-you could have made like millions of dollars[,]" and I said, "Sean nobody's going to trade and make millions of dollars on this stuff." That wasn't his intention. 

FBI: So why was Sean giving you this information? 

Robert: I think he was just proud of the fact that he was doing deals and y'know, almost like ["]hey, this deal is going to go way up[,"] not intending that somebody was going to trade on it.

Sean and Robert Stewart were both indicted in the United States District Court for the Southern District of New York ("SDNY"), and Robert pled guilty to one conspiracy count but Sean opted for trial. The government's case was largely dependent upon Robert's so-called "silver platter statement" implicating and incriminating Sean. Sean did his best to preclude the introduction of his father's damning testimony as hearsay and he attempted to impeach the credibility of the statement.  Moreover, when Sean attempted to subpoena his father's testimony, Robert asserted his Fifth Amendment and that was sustained by SDNY. I urge all serious Wall Street participants to read this thoughtful and intriguing 2Cir Opinion. As set forth in the Syllabus of the 2Cir's Opinion (Chief Judge Katzmann and Leval, J for the majority; Berman, J. dissenting):

Defendant‐appellant Sean Stewart appeals from a judgment of conviction entered on February 24, 2017, in the United States District Court for the Southern District of New York (Swain, J.). In connection with an insider trading scheme, the defendant‐appellant was found guilty after a jury trial of conspiracy to commit securities fraud and tender offer fraud, in violation of 18 U.S.C. § 371; conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; six counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78f; and tender offer fraud, in violation of 15 U.S.C. §§ 78n(e) and 78ff. On appeal, the defendant‐appellant argues that he was deprived of an opportunity to examine a key witness in light of that witness's improper invocation of the Fifth Amendment privilege against self‐incrimination; that his due process rights were violated by the district court's decision not to immunize that witness in order to allow the witness to testify without fear of self‐incrimination; and that several evidentiary errors were made. Although we disagree with the defendant's constitutional arguments, we nevertheless find that certain impeachment material that might have influenced the jury's deliberations should not have been excluded. Accordingly, the judgment of the district court is VACATED and REMANDED.
In an Indictment filed in the United States District Court for the District of New Jersey, federal proseuctors alleged that between May 2010 and August 2013,  Steven Fishoff, his friend Ronald Chernin, his brother-in-law Steven Costantin, Paul Petrello, and Joseph Spera short-sold securities on the basis of inside information obtained by Fishoff and others acting with or on his behalf. Fishoff tipped Petrello and Spera (who is identified as CC-1 in the indictment), either directly or through Petrello, with the inside information. Fishoff and his co-defendants gained more than $3.9 million in profits over the course of the three-year scheme. Petrello and Spera split their profits with Fishoff, generally on a 50-50 basis, as compensation to Fishoff for the inside information that he provided to them. Chernin and Costantin, who executed trades using Fishoff's capital, also split their combined profits with Fishoff on a 50-50 basis. Chernin, Costantin, Petrello, and Spera pled guilty in the insider trading scheme and are awaiting sentencing. Fishoff pled guilty to securities fraud and was sentenced to 30 months in prison plus three years of supervised release, and fined $50,000. Fishoff also agreed to settle the parallel civil forfeiture action, United States of America v. The Contents of Wedbush Securities Account Number 8313 et al., and to forfeit the property named as defendants in rem in the verified complaint filed in the parallel civil forfeiture action. 
Today's BrokeAndBroker Blog offers a number of lessons for both customers and stockbrokers about the perils of withdrawals of cash from accounts that go above and beyond what was contemplated when an annuity was purchased. On top of that, we have an interesting thought-piece on how best to deal with a missing-in-action customer who is on vacation.
The Texas State Securities Board entered a Disciplinary Order that levied a $25,000 fine on Trade-PMR Inc., a provider of trading platforms and other technology services to persons and firms acting as independent investment advisers. Allegedly, Trade-PMR failed o know that two of its investment advisers did not pay their registration renewal fees; and, despite becoming unregistered, the advisers continued to place trades through the firm. In addition to the fine, Trade-PMR will contribute $5,000 to the Investor Protection Trust READ the TSSB Order

SEC Division of Corporation Finance Staff No-Action, Interpretive & Exemptive Letters: The International Stock Exchange Authority Limited (November 2, 2018) As set forth in part in the Staff's response:

Based on the facts presented, the Division of Corporation Finance, acting for the
Commission pursuant to delegated authority, designates The International Stock
Exchange Authority Limited, including the market it operates, The International Stock
Exchange, as a "designated offshore securities market" within the meaning of Rule 902(b) of Regulation S under the Securities Act of 1933.