Securities Industry Commentator by Bill Singer Esq

July 18, 2019
In a Complaint filed in the United States District Court for the Southern District of Florida, the SEC charged Emmanuel "Manny K" Kouyoumdjian with violations of the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act, and the broker-dealer registration provisions of Section 15(a)(1) of the Securities Exchange Act. In part the SEC Release assertws that:

[K]ouyoumdjian solicited potential investors in ForceField, touted investments in ForceField, and negotiated and closed sales of ForceField stock. The complaint alleges that Kouyoumdjian successfully raised over $275,000 for ForceField and received over $27,000 in commissions to compensate him for these actions. As further alleged, Kouyoumdjian was previously employed as a registered stockbroker, but was barred from working as a registered stockbroker at the time that he solicited investors for ForceField.
I was an awestruck young teen watching Armstrong walk the moon. In the decades that followed, the vision of Earth as a lovely blue marble in the void dimmed as too much of the technology spawned by the space program has been used to widen inequalities of wealth and income.The rich always get richer by squeezing the rest of us, and the technology born of Apollo helps them do it faster and more effectively than ever. The next trips to the moon likely won't be to explore in the name of all of us, but to exploit for the benefit of the few of us.

FINRA settled with 56 member firms and obtained $89 million in restitution for nearly 110,000 charitable and retirement accounts as a result of its mutual fund fee waiver initiative. All of the settling firms failed to waive mutual fund sales charges for the eligible accounts and failed to reasonably supervise the sale of mutual funds offering sales charge waivers. As set forth in part in the FINRA Release:

Mutual funds offer several classes of shares, each with different sales charges and fees. Typically, Class A shares have lower fees than Class B and C shares, but charge customers an upfront sales charge. Many mutual funds waive their upfront sales charges on Class A shares for certain types of retirement accounts, and some waive these charges for charities.

Initially, in 2015, FINRA reached settlements with 10 member firms who self-reported to FINRA that their sales representatives failed to consider applicable sales charge waivers for charitable and retirement plan accounts that had purchased mutual funds (see FINRA News Releases dated July 6, 2015, and October 27, 2015). FINRA found that although the mutual funds available on the firms' retail platforms offered these fee waivers to charitable and retirement plan accounts, at various times dating back to at least July 2009, the firms did not waive the sales charges when they offered Class A shares to these customers. FINRA also found that these firms failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales.

Member firms continued to self-report the failure to offer mutual fund fee waivers, while FINRA discovered the same problem at other firms during examinations.  As a result, in May 2016, FINRA launched a targeted exam, known as a sweep, to conduct a review of a group of firms that had not self-reported the issue. FINRA and other regulators conduct sweeps to gather information on emerging issues and use this information to focus examinations and pinpoint an appropriate regulatory response, as needed. FINRA sanctioned 11 firms through the sweep, and reached settlements with another 35 firms, most of which self-reported prior to the sweep.  In total, FINRA sanctioned 56 firms for failing to waive mutual fund sales charges for eligible charitable organizations and retirement accounts, and failing to reasonably supervise the area.  Of the 56 firms sanctioned, 43 were granted extraordinary cooperation and not fined.2

Footnote 2: The remaining 13 firms were fined a total of $1.32 million.