Securities Industry Commentator by Bill Singer Esq

Federal Court Troubled By FINRA Arbitration Chair's Non-Disclosure of Conflict (BrokeAndBroker.com Blog)

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

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.

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.

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.  

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.

[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, leagle.com and RipoffReport.com 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.

• Securities Industry Commentator
• Bill Singer