Securities Industry Commentator by Bill Singer Esq

The Securities and Exchange Commission ("Commission") is proposing for public comment amendments to modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation S-K. These disclosure items have not undergone significant revisions in over 30 years. The proposed amendments are intended to update our rules to account for developments since their adoption or last amendment, to improve these disclosures for investors, and to simplify compliance efforts for registrants. Specifically, the proposed amendments are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material

[T]he proposed amendment of Item 101(a) would:

The proposed amendment of Item 101(c) would:

The proposed amendment of Item 103 would:

The proposed amendment of Item 105 would:

d. cease and desist (i) from placing debits in customer accounts resulting from Alpine's $5,000 monthly account fee; (ii) from transferring cash from customer accounts to cover debits resulting from Alpine's $5,000 monthly account fee; and (iii) from selling, journaling, or otherwise transferring securities from customer accounts to Alpine-owned accounts in order to satisfy debits resulting from Alpine's $5,000 monthly account fee; 

e. reverse the $5,000 monthly account fee assessed in all currently open customer accounts, specifically, reverse any debits, repay any cash to cover any such debits, and restore any securities sold, journaled, or otherwise transferred from customer accounts to satisfy any such debits; 

f. cease and desist from selling, journaling, or otherwise transferring securities from customer accounts on the ground that Alpine has deemed such securities to be "worthless"; 

g. cease and desist from selling, journaling, or otherwise transferring securities from customer accounts on the ground that Alpine has deemed such securities or accounts to be "abandoned";

[B]etween approximately March 2015 and April 2018, Cucinella falsely represented to Mackrow investors, many of whom were elderly, that their funds would be used to invest in pre-initial public offering (pre-IPO) shares of private companies, including a company purportedly that manufactured bug spray.  In a brochure that Cucinella provided to clients, Mackrow was described as "providing you all the resources of a true financial concierge."  During the same time period, Cucinella transferred more than $400,000 from the Mackrow account to bank accounts he controlled, and spent approximately $108,000 for credit card payments and $40,000 at a Mercedes-Benz dealership in Brooklyn.  More than 80 individuals invested approximately $778,000 with Mackrow, and received only $80,818 in return.

fraudulently sold and marketed binary options to investors located in the United States and throughout the world through two websites, known as BinaryBook and BigOption.  The evidence showed that in her role as CEO of Yukom, Elbaz, along with her co-conspirators and subordinates, misled investors using BinaryBook and BigOption by falsely claiming to represent the interests of investors when, in fact, the owners of BinaryBook and BigOption profited when investors lost money; by misrepresenting the suitability of and expected return on investments through BinaryBook and BigOption; by providing investors with false names and qualifications and falsely claiming to be working from London; and by misrepresenting whether and how investors could withdraw funds from their accounts.  Representatives of BinaryBook and BigOption, working under Elbaz's supervision, misrepresented the terms of so-called "bonuses," "risk free trades" and "insured trades," and deceptively used these supposed benefits in a manner that in fact harmed investors, the evidence showed.  

BRETAS operated a group of investment companies, including Phynance Capital Management LLC ("Phy Cap"), Phy Global Partners Fund LLC ("PGP"), Absolute Experience LLC ("Absolute"), and Global Partners Investors LLC ("GPI"), that he used to solicit investments from.  Phy Cap was a commodity pool operator and commodity trading advisor, registered with the NFA, as required by CFTC.  In his companies' marketing materials, BRETAS represented that he used "statistical analysis and mathematical modeling of historical data to develop quantitative systematic methodologies applied to managed futures strategies."  In fact, while BRETAS solicited more than $7.5 million from individual investors, he conducted only a minimal level of trading; his predominant use of his companies was the theft of investor money, using it to cover his personal expenses and transferring investor funds abroad.  In order to continue the scheme, and solicit additional investments, BRETAS prepared false monthly statements, purporting to demonstrate the investments' growth, and distributed them to the Victims. When his regulators, the CFTC and NFA, initiated an audit in 2017, BRETAS lied about his affiliation with Absolute, falsely claimed that the funds that the Victims invested in PGP were mere loans to his company, lied about the use of those funds and the solicitation of investments, and ultimately created a fraudulent email account for the purpose of impersonating one victim in communications with the NFA. .

[F]arish, a long-time commercial airline pilot, raised over $1 million from March 2016 to June 2017 by selling investments in a NSH real estate project to build and sell a high-end home on an empty lot in Westlake, Texas. Farish allegedly targeted fellow commercial airline pilots with large 401(k) accounts, and convinced them to invest their funds in the NSH real-estate investment opportunity, which was purportedly secured by a second lien on the property. As alleged in the SEC's compliant, Farish fraudulently misrepresented to investors the nature of the investment and how NSH would spend the investment funds. In fact, Farish allegedly sold the same investment on three different occasions and purported to grant three separate investors the same "second lien." The complaint further alleges that Farish and NSH did not use investor funds to build the home as promised and instead commingled investor funds in a NSH bank account with other funds, which Farish used to pay personal items, including Disney cruises, entertainment and retail expenses, and a retainer for a criminal defense lawyer for one of Farish's sons. Despite raising more than $1 million for this single project, the real estate lot and the NSH bank account are empty today.

[K]abra, through LaunchByte.io, LLC, told investors they could make double-digit returns in a matter of months with no risk by providing Kabra with short-term infusions of cash to be invested in one or more startup companies that Launchbyte purportedly had an ownership interest in. In fact, these "investment" opportunities were fabrications, the SEC alleges; upon receiving investor funds, Kabra diverted them almost immediately to his own use-in one instance, to pay for a boat Kabra had agreed to purchase, and, in other instances, to pay back earlier investors in Ponzi-like distributions. The SEC alleges that Kabra repeatedly lied to investors to keep them from discovering his fraud.

• Securities Industry Commentator
• Bill Singer