Securities Industry Commentator by Bill Singer Esq

January 7, 2020

featured in today's Securities Industry Commentator:

FINRA  Fines TD Ameritrade Over "Professional Customer" Coding For Option Orders. In the Matter of TD Ameritrade, Inc., Respondent (FINRA AWC)

FINRA Fines and Suspends Rep Over Allowing Unregistered Rep to Use His Code and In Mis-use of Currency Transactions Reports ("CTRs"). In the Matter of Bruno H. Silva, Respondent (FINRA AWC)

SEC Charges South Florida Businessman with Facilitating Brother-In-Law's Misappropriation of Millions from Investors (SEC Release)

Computer Programmer Sentenced In Cyberattack Threat Case (DOJ Release)

The Crap That Winds Up In My Inbox: FRESH CUT BG/SBLC
A former Credit Suisse employee filed a FINRA Arbitration Statement of Claim arguing that he was, in part, fraudulently induced into accepting his job because the firm did not inform him of its intention to eliminate the division where he was to work. Not only did Claimant lose the arbitration but Credit Suisse was awarded nearly $2 million in damages, largely in the form of a promissory note repayment. On appeal to a federal court, Claimant alleges that the FINRA Arbitration Chair had failed to disclose a conflict and that the Panel engaged in biased conduct.

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, TD Ameritrade, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that TD Ameritrade, Inc. has been a FINRA member firm since 1979, and has about 310 branches with over 5,000 registered reps. The AWC alleges that TD Ameritrade, Inc."does not have any relevant disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization." In accordance with the terms of the AWC, FINRA imposed upon TD Ameritrade a Censure and a $250,000 fine. As alleged in the "Overview" portion of  the FINRA AWC:

From between 2010 and April 1, 2015 (the "Relevant Period"), the Firm inaccurately coded options orders entered by ten customers on its thinkorswim ("TOS") platform as "Customer" rather than "Professional Customer." A Professional Customer origin code is required for all option orders submitted by customers who are not broker-dealers and who enter an average of more than 390 options orders per day during any month during the prior quarter. 

The Firm mismarked approximately 1.5 million options orders that were routed to options exchanges, resulting in the execution of approximately 500,000 mismarked options orders. The miscoding caused inaccurate order records and potentially allowed those orders to be given undue priority for execution on the options exchanges, which prioritize Customer orders over Professional Customer orders in execution. As a result, the Firm violated Section 17(a) of the Securities Exchange Act, Rule 17a-3(a)(6)(i), NASD Rule 3110(a) (for conduct that took place prior to December 5, 2011) and FINRA Rules 4511 (for conduct on or after December 5, 2011) and 2010. 

The Firm's supervisory system was not reasonably designed to determine whether its customers' options orders entered through its TOS platform were accurately coded. The Firm's system for keeping track of the number of options orders entered by its customers through its TOS platform did not aggregate orders submitted by the same customer through multiple accounts, and this deficiency caused the Firm to fail to detect that options orders for certain customers were being miscoded. Moreover, the Firm did not have a written supervisory procedure ("WSP") for orders executed through its TOS platform. 

As a result, the Firm violated NASD Rules 3010(a) and (b) (for conduct occurring prior to December 1, 2014) and FINRA Rules 3110(a) and (b) (for conduct occurring on or after that date) and FINRA Rule 2010.

Bill Singer's Comment: Seriously? Really?? TD Ameritrade has no "relevant disciplinary history?" If you visit the firm's BrokerCheck page at, you will find listed under "Disclosure Events," that there are 71 items denoted as "Final" and as a "Regulatory Event." Oh, and, by the way, there are 118 final arbitration disclosures but, hey, who gives a crap, right? Frankly, I find it amazing that FINRA does not deem any of TD Ameritrades 71 final regulatory disclosures as constituting a "relevant disciplinary history." I'd love to know the name of the executive at FINRA who is tasked with determining what's a "relevant" disciplinary history -- my clients might love to be blessed with such an expansive interpretation of relevancy. Just because I'm a curious fellow, I did a search of those 71 final regulatory events and found that there were 19 hits for the search-term "Supervisory System." Maybe FINRA would like to try the same exercise?

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, Bruno H. Silva submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Bruno H. Silva was first registered in July 2017 and by December 2017, he was registered with FINRA member firm Worden Capital Management until he was permitted to resign in May 2018. The AWC alleges that Silva "does not have any disciplinary history with the SEC, any state securities regulators, FINRA, or any other self-regulatory organization." In accordance with the terms of the AWC, FINRA found that Silva had violated FINRA Rules 4511 and 2010; and the self regulator imposed upon him a $15,000 fine and a 16-month suspension in all capacities from any FINRA member firm. As alleged in part in the FINRA AWC:

From December 2017 through April 2018, Silva permitted another Worden registered representative, Yousuf Saljoold (CRD No. 5045123) ("Saljooki"),' to use Silva's representative code to open accounts and effect securities transactions in at least nine customers' accounts in states where Silva was licensed, but where Saljoold was not. Silva thus caused Worden to maintain inaccurate books and records required under the Exchange Act.

In addition to the above conduct, the AWC further asserts in part that:

On February 15, 2018, Silva intentionally structured cash withdrawals totaling $22,500 by making three separate withdrawals from three different bank branches of the same bank to prevent the filing of CTRs. Silva had knowledge of CTR requirements from training he received as a registered representative in December 2017 related to the BSA and CTR requirements. By structuring withdrawals from his personal bank account to evade CTR filings, Silva failed to observe high standards of commercial honor and just and equitable principals of trade.
In a Complaint filed in the United States District Court for the Southern District of Florida, the SEC charged Steven A. Schwartz with aiding and abetting 1 Global Capital LLC's and Carl Ruderman's violations of the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) thereunder. As alleged in part in the SEC Release:

The Securities and Exchange Commission today charged a South Florida businessman with aiding and abetting the misappropriation of millions of dollars of investor funds from 1 Global Capital, LLC, a now-bankrupt Florida-based merchant cash advance company. The Commission previously charged 1 Global and its former founder, chairman, and CEO, Carl Ruderman, with misappropriating the funds as part of a $322 million fraud perpetrated on 3,600 retail investors in 42 states.

According to the SEC's complaint, Steven A. Schwartz, Ruderman's brother-in-law, served as 1 Global's director and, according to 1 Global's marketing materials, as its chief operating officer. The complaint further alleges that Schwartz became trustee of a Ruderman family trust in June 2014, and that shortly afterwards, Ruderman had Schwartz execute an agreement conveying ownership of 1 Global to the trust. As alleged, until 1 Global declared bankruptcy in July 2018, Schwartz allowed Ruderman to use the trust to misappropriate several million dollars in investor funds to pay for Ruderman's luxury lifestyle.

In a parallel action, the U.S. Attorney's Office for the Southern District of Florida today announced criminal charges against Schwartz.

Computer programmer David Dorsett pled guilty in the United States District Court for the District of Kansas to two counts of making extortionate threats via the internet. Co-Defendant Brad Pistotnik pled guilty and was sentenced to pay a $375,000 fine and $55,200 in restitution.  Dorset, 37, was sentenced to three year federal probation and fined $2,000. As alleged in part in the DOJ Release: 

[D]orsett admitted he Pistotnik met with Dorsett and showed him postings on the internet that Pistotnik wanted removed, including a Kansas Supreme Court disciplinary opinion for Pistotnik and a negative consumer review. Email communications between Dorsett and Pistotnik contacted Pistotnik in September 2014 offering reputation management services. showed Postnik saying, "Any luck removing that bad website I showed you?" and "tell me how we get rid of it."

Dorsett sent a barrage of emails to two web sites, and demanding they remove information critical of Pistotnik. The emails read in part, "If you don't remove it we will begin targeting your advertisers and explain that this will stop happening to them once they pull their ads. . ." Dorsett billed Pistotnik for sending the threats and Pistotnik paid him by check the same day.


Jogesh Chandra Jerath

Dear ma/sir

We specialized in Bank Guarantee {BG}, Standby Letter of Credit
{SBLC}, Medium Term Notes {MTN}, Confirmable Bank Draft {CBD} as well
as other financial instruments issued from AAA Rated bank such as HSBC
Bank Hong Kong, HSBC Bank London, Deutsche Bank AG Frankfurt, Barclays
Bank , Standard Chartered Bank and others on lease at the lowest
available rates depending on the face value of the instrument needed.
We will be glad to share our working procedures with you upon request
to help us proceed towards closing deals effectively. For further
inquiry contact

Thank you

Contact : Mr.Jogesh Chandra Jerath

Bill Singer's Comment: Of course this all must be legit -- after all, the sender has a Gmail address for his CapitalFinance company, and, clearly he specializes in all these bank instruments because, you know, he say so. The only thing that gives me pause (and I mean the ONLY thing) is that Mr. Jerath addressed his "Fresh Cut BG/SBLC" query to my "ma" and me, so I have to find out beforehand if my mother is interested in any fresh cut bank instruments. I know that Ma is eager to proceed towards closing a deal with her son effectively but it's only fair that I check with her to see if she got a lower rate quote during her recent conversations with AAA-rated banks.