Securities Industry Commentator by Bill Singer Esq

November 12, 2018
In another thoughtful yet provocative speech, SEC Commissioner Peirce muses about the best way to calibrate enforcement in terms of encouraging diligent in-house compliance policies and practices. Consider two extracts below from her remarks:

When a firm needs to cobble the records together after the fact to satisfy our requests, the firm is likely not holding up its end of the compliance bargain. If you don't have your records in order, we start to wonder how you are even able daily to do your job. The firm cannot conduct its own internal reporting and monitoring without complete records. How can you prepare an exception report if you do not know what is exceptional? You need to know what normal looks like so that you can spot something that is not normal. In short, when a firm is out of compliance with the SEC's recordkeeping rules, I am less concerned that there is a books and records rule violation than that the firm's recordkeeping issues might become substantive problems for the firm and its clients.
. . .

I share these concerns. We cannot afford to drive out of the profession people whose talents, commitment, and experience help to make our capital markets so remarkable. We need people like you to stay in the industry and recruit and train the next generation of compliance professionals. You will do neither if we tell you through our enforcement actions that we do not trust your judgment. A conflict between your judgment and ours, which is always informed by hindsight, should not result in an enforcement action against you. Troubled by the prospect of running people like you out of the industry, I have been extremely reluctant to charge compliance officers.
In its press release,"Odeon Capital Group LLC Strengthens Equity Desk Research," the broker-dealer announced on December 7, 2016, its hire of Jahanara Nissar as an Equity Desk Analyst in Technology, Media and Telecommunications. Odeon was happy to have Nissar onboard. She had all the tools to make it on Wall Street and seemed headed in the right direction. Unfortunately, life is full of surprises. Some of which are quite nasty.
Try as I might, it's going to be difficult to make this SEC Release all that clear, so, that being said, let me pretty much let the bulk of the document speak for itself:

The Securities and Exchange Commission charged Joseph Meli in January 2017 with fraud for running a Ponzi scheme. The SEC alleged that Joseph Meli raised money from investors to fund businesses purportedly created to purchase and resell tickets to such high-demand shows as Adele concerts and the Broadway musical Hamilton. Joseph Meli was criminally charged in a parallel case in which he pled guilty and was sentenced to a 78-month prison sentence. He also was ordered in the parallel criminal case to forfeit over $104 million, including a house in East Hampton, New York, and to pay over $56 million in restitution.

Jessica Ingber Meli is the wife of Joseph Meli. The SEC named Jessica Ingber Meli as a relief defendant for the purpose of recovering investor funds allegedly in her possession, including $3 million which was used to purchase the house in East Hampton in her name. She agreed to settle with the SEC, consenting to disgorgement and prejudgment interest of approximately $4 million. Because the house in East Hampton is subject to the forfeiture order entered against Joseph Meli in the parallel criminal case, approximately $3.2 million of the judgment will be deemed satisfied and Jessica Ingber Meli will be obligated to pay approximately $840,000.

Joseph Meli's co-defendant, Matthew Harriton, and several of Harriton's entities, settled the SEC's charges against them in July 2018. In September 2017, the SEC also charged Joseph Meli and New York sports radio personality Craig Carton with fraud for stealing millions of dollars from investors who were allegedly promised their funds would be used for the purchase and resale of concert tickets. The SEC's litigation against Joseph Meli and others in both cases is ongoing. . .

READ the SEC Meli, Harriton, et. al Complaint

Stockbroker Told to Provide Personal Email Account Password to Employer ( Blog)
If you work on Wall Street, you know -- or you should know -- that you're not supposed to conduct business activities via your personal email account. Sure, I know, the office email account is crap and it often crashes and then there's that whole thing about how your compliance department randomly reviews your communications and, sure, there was that time, only once mind you, but, you know, it was a mistake, you didn't really mean to attach that pornographic image of Santa Claus and that one elf to your Christmas message to your clients that you sent from your personal email account, but, hey, it was the night after the office party and you had a bit too much egg nog and, gee, no one has a sense of humor anymore, and, anyways, you didn't send the porn via your office email account, right?In any event, by way of spoiler alert, there's no pornography involved in today's column but we do have the disputed use of a personal email account and that got FINRA involved, which ended with a fine and suspension.

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Commonwealth Financial Network submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Commonwealth Financial Network, Respondent (AWC  2016049975901 , November 9, 2018).
As set forth in the AWC's "Overview":

Between July 1, 2009 and July 26, 2017 (the "Relevant Period"), Commonwealth disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase Class A shares in certain mutual funds without a front- end sales charge ("Eligible Customers"). These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, Commonwealth failed to establish and maintain a supervisory system, and failed to establish, maintain, and enforce written supervisory procedures, reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, Commonwealth violated NASD Conduct Rule 3010 (for misconduct before December 1, 2014), FINRA Rule 3110 (for misconduct on or after December 1, 2014), and FINRA Rule 2010. 

In accordance with the terms of the AWC, FINRA imposed upon Commonwealth a Censure and required that the member firm provide remediation to qualified Eligible Customers who did not receive the waivers as described in Section A of this document. The Commonwealth AWC asserts:

In resolving this matter, FINRA has recognized the extraordinary cooperation of Commonwealth for having: (1) initiated, prior to detection or intervention by a regulator, an investigation to identify whether Eligible Customers received sales charge waivers during the Relevant Period; (2) voluntarily expanded the Relevant Period of applicable transactions, resulting in additional restitution to additional customers; (3) promptly established a plan of remediation for Eligible Customers who did not receive appropriate sales charge waivers; (4) promptly taken action and remedial steps to correct the violative conduct; and (5) employed subsequent corrective measures, prior to detection or intervention by a regulator, to revise its procedures to avoid recurrence of the misconduct.  

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Mark Stewart Saunders submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Mark Stewart Saunders, Respondent (AWC 2018058028601, November 9, 2018).
In accordance with the terms of the AWC, FINRA imposed upon Saunders a $7,500 ($3,750 of which pertains to the violation of MSRB Rule G-17)  and a 30-business-day suspension from associating with any FINRA member in any capacity. As set forth in the AWC's "Overview":

In February and March 2018, Saunders accepted instructions from third parties to effect transactions in Edward Jones accounts. In February 2018, Saunders violated NASD Conduct Rule 2510 and FINRA Rule 2010 when he purchased mutual funds in a trust account based on instructions from the co-trustees' daughter, who was not authorized to provide instructions for the trust. In March 2018, Saunders violated MSRB Rule G-17 by accepting instructions to purchase mutual funds in a customer's 529 plan accounts from the customer's daughter, who was not authorized to provide instructions.

(SEC Litigation Release)
In a Complaint filed in the United States District Court for the District of Maryland,  the SEC named Amanda Merrill and Lalaine Ledford,respecitvely,  the wives of Kevin B. Merrill and Jay B. Ledford,  as Relief Defendants. The husbands were named as Defendants and charged with raising over $345 million from 230 investors pursuant to an alleged Ponzi-like scheme. The wives allegedly received millions of dollars' worth of proceeds from the fraud their husbands and another individual ran in the form of real property, cash, luxury items and other goods, to which they have no legitimate claim.