Securities Industry Commentator by Bill Singer Esq

February 26, 2019
As set forth in the "Summary" portion of the SEC Motion and Memo:

Plaintiff United States Securities and Exchange Commission (the "SEC") respectfully moves this Court for an order to show cause why Defendant Elon Musk should not be held in contempt for violating the clear and unambiguous terms of the Court's October 16, 2018 Final Judgment as to Defendant Elon Musk (the "Final Judgment"). 

 On September 27, 2018, the SEC filed a complaint against Musk, the Chief Executive Officer of Tesla, alleging that he published a series of false and misleading statements to millions of people, including members of the press, using the social media platform Twitter. See Complaint as to Defendant Elon Musk, 1:18-cv-8865-AJN-GWG, Dkt. No. 1. Two days later, on September 29, 2018, Musk agreed to settle the SEC's charges. See Consent and Proposed Final Judgment as to Defendant Elon Musk, 1:18-cv8865-AJN-GWG, Dkt. Nos. 6-1, 6-2. 

On October 16, 2018, this Court entered a Final Judgment against Musk that, among other things, ordered Musk to comply with procedures implemented by Tesla that would require Musk to seek pre-approval of any written communications, including social media posts, that contained or reasonably could contain information material to Tesla or its shareholders. See Final Judgment of Defendant Elon Musk, 1:18-cv-8865- AJN-GWG, Dkt. No. 14, at 13-14. The SEC required this provision as a term of its settlement with Musk in order to prevent Musk from recklessly disseminating false or inaccurate information about Tesla in the future. 

 On February 19, 2019, Musk tweeted, "Tesla made 0 cars in 2011, but will make around 500k in 2019." Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people. Musk has thus violated the Court's Final Judgment by engaging in the very conduct that the preapproval provision of the Final Judgment was designed to prevent.
The Department of Justine concluded that the CFA Institute ("CFAI"), which offers the Chartered Financial Analyst certification,  violated the Immigration and Nationality Act by discriminating against qualified U.S. workers. In settling DOJ's charges CFAI will pay $321,000 in civil penalties to the United States; train employees on the requirements of the INA's anti-discrimination provision; and be subject to departmental monitoring and reporting requirements. As set forth in part in the CFA Settlement Agreement

THIS SETTLEMENT AGREEMENT ("Agreement") is entered into by and between CFA Institute ("Respondent" or "CFAI"), and the United States Department of Justice, Civil Rights Division, Immigrant and Employee Rights Section ("IER") (collectively "the Parties"). 


WHEREAS, by letter dated July 31, 2017, IER notified Respondent that it had initiated an independent investigation, DJ# 197-80-39 ("IER Investigation"), to determine whether Respondent had engaged in unfair immigration-related employment practices prohibited by 8 U.S.C. § 1324b ("Act"). 

WHEREAS, IER concluded based upon the IER Investigation that there is reasonable cause to believe that from at least November 2016, until at least January 2018, Respondent engaged in a pattern or practice of discriminatory hiring based on citizenship status by: 1) preferring to hire individuals who hold or require sponsorship for temporary work visas; and 2) failing to consider U.S. workers for all available examination grading positions, in violation of 8 U.S.C. § 1324b(a)(1)(B). Specifically, IER concluded that Respondent preferred to hire and rehire individuals holding or requiring H-1B, H-1B1, and E-3 visas for certain grading positions that it set aside for them, based on their citizenship status, and that Respondent failed to consider qualified and available U.S. workers for those positions. 

WHEREAS, Respondent denies that it engaged in a pattern or practice of discriminatory hiring based on citizenship, and further denies the specific conclusions reached by IER. . . .
In a Complaint filed in the Central Distict of California, the SEC alleged that Corinthian Colleges, Inc. had 
borrowed tens of millions of dollars from its credit facility immediately before fiscal year end, to increase the long-term debt it reported to the U.S. Department of Education (DOE) and the "Composite Score" that DOE calculated to determine Corinthian's access to federal education funds.Shortly after the next fiscal year, Corinthian repaid the prior year-end borrowing. DOE informed Corinthian that the company's treatment of its purported long-term-debt was questionable given the aforementioned factors. Accordingly, the Complaint alleged that although under the direction of former CEO Jack D. Massimino and former CFO Robert C. Owen, Corinthian had disclosed DOE's finding in SEC reports filed in August and September 2013, said reports omitted to disclose that Corinthian had inflated its Composite Scores in 2012 and 2013 with such borrowings, resulting in risk that the DOE would lower Corinthian's Composite Score for those years, which in turn would jeopardize its future access to federal education funds and its status as a going concern. Massimino and Owen agreed to consent to an injunction against violations of Section 17(a)(3) of the Securities Act of 1933 and aiding and abetting violations of Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13a-11, and to pay an $80,000 civil penalty. Additionally, Owen consented  to an injunction against aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11, and to pay a $20,000 civil penalty. READ the SEC Complaint
Today's featured FINRA regulatory settlement was prompted by a complaint about a stockbroker's "dealings with a vulnerable individual." Who sent that complaint? We're not told. What we do know is that the stockbroker violated FINRA's rules by failing to inform his employer UBS Financial Services Inc. about his roles as a trustee and an attorney-in-fact. Also, various away account documents indicate that the stockbroker was an "attorney" or retired or unemployed. Not stated in the AWC was whether FINRA determined that the accounts at issue were profitable or sustained losses.  In the end, there are more unanswered questions than compelling conclusions in this AWC.

FINRA Bars Former JP Morgan Stockbroker In Kiting Scheme
In the Matter of Bradley Curtis Williams, Respondent (FINRA AWC 2017053675002 / February 21, 2019)
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, Bradley Curtis Williams, submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed on Williams a Bar from associating with any FINRA member firm in any capacity. FINRA's investigation of Williams was instigated by the regulator's receipt of a Form U5 from Williams former employer J. P. Morgan Securities LLC, in which the firm allegedly stated that he had "initiating a personal bank funds transfer from an outside financial institution to his personal Chase bank account without sufficient funds available . . ." In deeming Williams' conduct to constitute conversion of funds in violation of FINRA Rule 2010, the AWC sets forth in part the following:

During the time Williams was registered with JPMS, he was also dually employed by JPMS's affiliated bank, J.P. Morgan Chase Bank ("Chase"). In early 2017, facing financial difficulties, Williams initiated a kiting scheme to obtain and spend funds to which he was not entitled. Specifically, on January 18, 2017, Williams used the Chase online banking system to initiate a transfer of $10,000 from an outside bank account to an account he controlled at Chase (the "Chase account"). The outside bank account had been closed for several years and contained no funds. Williams used the provisional credit caused by the transfer to make on-line payments and debit-card purchases that he would otherwise not have been able to make because he lacked the necessary funds. 

In addition to the on-line payments and debit-card purchases, on January 20, 2017, Williams opened a new bank account at Chase and then immediately transferred $1,500 to it from the Chase account. On that same date, Williams also caused his paycheck from Chase, which had previously been direct-deposited into the Chase account, to be deposited going forward into his new account. The $1,500 transfer as well as the other payments and purchases he made using the provisional credit from the $10,000 transfer caused a debit balance in the Chase account of $2,254.06, not including overdraft and other fees. Williams has not repaid the debit balance.