Securities Industry Commentator by Bill Singer Esq

New strain of flu found in China has potential to become a pandemic, scientists warn (CNBC Release by Holly Ellyatt)

Costco Uses Supreme Court's CFPB Ruling to Force Patriotic Americans to Eat Leftist Round Cakes (BrokeAndBroker.com Blog)

Torture, Terror, and Revenge in Battle Over Fabled Irish Company / Sean Quinn was once a billionaire folk hero, but then things turned very dark in the borderlands.(Bloomberg by Kit Chellel and Liam Vaughan)

2Cir Sustains Regulation Best Interest

XY Planning Network, LLC et al. v. United States Securities and Exchange Commission and Walter Clayton, Respondents (Opinion, 2Cir)

SEC Charges BNP Paribas with Violations of Regulation SHO (SEC Release)

SEC Updates Filing Threshold to Rule 17h Reporting Requirements for Broker-Dealers (SEC Release)

Pending home sales spike a record 44.3% in May, as homebuyers rush back into the market (CNBC by Diana Olick)

FINRA Imposes Fine, Disgorgement, and Suspension for Rep's Private Securities Transactions.

In the Matter of Gregory A. Ricker, Respondent (FINRA AWC)

Former CEO of Navistar International Corporation Barred from Serving in Senior Positions in Public Companies (SEC Release)

CFTC Charges Chicago-Based Firm and Six Individuals in Multi-Million Dollar Options Fraud Scheme (CFTC Release)

CFTC Orders Illinois Firm to Pay $250,000 for Supervision Violations / Failure to Supervise Put Seniors' Retirement Savings at Risk (CFTC Release)

Hampton Woman Sentenced to 18 Months for Mail Fraud Targeting Restaurants and Insurance Companies (DOJ Release)

Glendale Man Pleads Guilty to Bank Fraud for Role in Credit Card 'Bust-Out' Scheme Used to Buy Cemetery Plots, Luxury Cars (DOJ Release)

The scientists published their peer-reviewed findings in U.S. science journal Proceedings of the National Academy of Sciences on Monday. They said the new strain of flu, which they called "G4 EA H1N1," is a variation of swine flu, and includes the "G4" genotype that has become predominant in swine populations since 2016.

As with swine flu, the new strain has been identified as having "all the essential hallmarks of a candidate pandemic virus."

SIDE BAR: Little known fact but the "Jay" Clayton that we all know as the SEC Chair is actually Walter Joseph "Jay" Clayton III. 

In 2019, the Securities and Exchange Commission promulgated Regulation Best Interest, which creates new standards of conduct for broker-dealers providing  investment services to retail customers. Petitioners XY Planning Network, LLC, Ford Financial Solutions, LLC, and a group of states and the District of Columbia 33 filed petitions for review under the Administrative Procedure Act, 5 U.S.C. § 706(2), claiming that Regulation Best Interest is unlawful under the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act. We hold that: (1) Ford Financial Solutions has Article III standing to bring its petition for review, (2) Section 913(f) of the Dodd-Frank Act authorizes Regulation Best Interest, and (3) Regulation Best Interest is not arbitrary and capricious. DENIED.

Judge Sullivan concurs in part and dissents in part in a separate opinion.

[O]n at least 35 occasions over a four-month period in 2016, BNPP's customer submitted sale orders marked as "long" to another broker for execution, which were subsequently submitted to BNPP for clearing. For each of those "long" sales, the customer did not have sufficient shares in its prime brokerage account at BNPP on the morning of the settlement date to cover the sale order. When the customer failed to deliver the shares by the settlement date, BNPP loaned the customer shares to cover the sale. The order finds that BNPP loaned its customer a total of more than eight million shares in the securities of three different issuers to settle purported "long" sales that had been submitted to BNPP for clearing.

According to the SEC's order, it was not reasonable for BNPP to rely on its customer's assurances that the orders were properly marked "long" and that the customer would deliver the securities to its BNPP account prior to the settlement date because BNPP was on notice of the customer's repeated failures to deliver the securities by the settlement date.

In 1992, the Commission adopted the 17h Rules, which set forth specified recordkeeping and reporting requirements for certain broker-dealers that are part of a holding company structure, pursuant to the Market Reform Act of 1990. Broker-dealers that do not hold customer funds or securities, owe money or securities to customers, or otherwise carry the accounts of or for customers are exempt from the 17h Rules provided that they maintain capital, including subordinated debt, of less than $20 million. Today's order updates this threshold for the first time and provides an exemption from the 17h Rules for broker-dealers with capital between $20 million to $50 million so long as the broker-dealer maintains less than $1 billion in total assets. Firms maintaining $50 million or more in capital, including subordinated debt, currently account for approximately 98 percent of the total capital of the broker-dealers subject to the 17h Rules; these firms will continue to remain subject to the rules.

Regionally, pending home sales in the Northeast rose 44.4% for the month but were down 33.2% from a year ago. In the Midwest, sales rose 37.2% monthly and were down 1.4% annually.

Pending home sales in the South increased 43.3% month-to-month and were up 1.9% from May 2019. In the West sales jumped 56.2% monthly and were 2.5% lower annually.

In or around October 2017, Ricker solicited A, who was not a Firm customer, to invest in the Company. Ricker introduced A to the Company's chief executive officer, attending an in-person meeting where the terms of A's prospective investment were discussed. In December 2017, A invested $500,000 in the Company. A's investment was documented with a promissory note requiring annual payments from June 2018 to December 2020. In April 2018, A invested an additional $250,000 in the Company documented with a stock purchase agreement in the amount of $750,000, representing the total amount of A's investment in the Company. For each investment by A, the Company paid Ricker a 10% referral fee in the amounts of $50,000 and $25,000, respectively. 

Ricker did not provide written notice to Westpark of his intent to solicit an investor on behalf of the Company or otherwise advise the Firm of either A's investment or Ricker's receipt of referral fees. Ricker also made false statements to the Firm on two annual compliance questionnaires concerning his participation in private securities transactions. 

By participating in a private securities transaction for which he received selling compensation without providing prior written notice to, and receiving written approval from, his member-firm employer, Ricker violated FINRA Rules 3280 and 2010.  

[F]rom at least June 2015 through December 2019, Long Leaf, at the direction of Donelson and Evans, and through its agents and employees, including Ruth and Nelson, knowingly made numerous false and misleading statements to customers and prospective customers about the success of Long Leaf's "Time Means Money" options trading program. According to the complaint, all of Long Leaf's customers lost money trading pursuant to the program. The defendants were aware of the losses, and knowingly or recklessly failed to disclose them to customers and prospective customers. In total, more than 400 customers lost approximately $6.1 million, while Long Leaf made more than $4.4 million from its trading recommendations, which were designed primarily to generate commissions.

The order finds that Cunningham Commodities' supervision of the GIB-introduced accounts over a sixteen month period was not diligent. The order further finds that Cunningham Commodities entered into the guarantee with the GIB despite knowing that the GIB offered a "trading program" to customers even though it was not registered as a commodity trading advisor and that the vast majority of customers lost money under the GIB's trading program. The GIB's customers included many senior citizens, and many of the accounts traded were retirement accounts.

Moreover, according to the order, Cunningham Commodities learned that the National Futures Association believed that the "[GIB] used misleading and deceptive solicitations and communications to entice investment in a program that the firm know[s] has consistently lost money for substantially all customers," but did not take adequate steps in response.  The order further finds that Cunningham Commodities required the GIB to record its solicitation calls, but did not listen to those calls, even as customer accounts continued to decline in value. Taken together, these findings establish a failure to supervise.

[F]or nearly four years, Masse defrauded or attempted to defraud restaurants and insurance companies of nearly $400,000.  Masse mailed letters to restaurants and food companies in which she falsely claimed that she (or another member of her family) became seriously ill after eating food served by the restaurants or packaged by the food companies.  In some letters, Masse impersonated her children, claiming to have become seriously ill after eating food served by the restaurants or packaged by the food companies.

In each of the letters, Masse falsely stated that the purported letter-writer paid or borrowed money to pay their medical expenses because they did not have health insurance.  The defendant demanded that the restaurant or food company reimburse the supposed letter-writer for their medical expenses and compensate them for their pain and suffering.  None of this was true.

According to the court documents and statements made in court, to support each demand letter, Masse provided to the affected business and their insurance companies fraudulent medical records allegedly obtained from hospitals in New Hampshire and Massachusetts as false evidence of the fictitious illnesses.  Masse stole, and later altered, some of the medical records from the client files of a law firm, where she worked as an office manager and paralegal.  Masse also stole checks from the law firm, which she altered to support her fraudulent insurance claims.

In correspondence with the insurance carriers, Masse demanded payments totaling more than $399,000.  Some of the insurance companies responded by mailing insurance settlement checks totaling more than $206,000 to either Masse's home in Hampton or the homes of her children, who were unwitting participants in the scheme to defraud.  To conceal her involvement in the fraud, Masse had her children deposit checks mailed to them into their personal bank accounts and then write Masse a check for the full amount of the payout.      

admitted to running a series of fraudulent schemes, including one from November 2014 to September 2015, where he used fraudulently obtained credit cards to purchase hundreds of thousands of dollars' worth of liquor and luxury watches.

Hmayakyan and others obtained the credit cards - sometimes using their real names, but often with synthetic identities created with a combination of real and fictitious information - that were run up to the credit limit. Members of the scheme then "paid down" by submitting payments from accounts with insufficient funds or through fake accounts to restore the credit line, which allowed them to make additional purchases.

As part of the scheme, Hmayakyan and others used the fraudulently obtained credit cards to purchase hundreds of thousands of dollars in alcoholic beverages on behalf of the now-closed Liquor Spot in Glendale, where co-defendant Vahan Aloyan, 45, of Glendale, was a manager.

During the execution of a search warrant in 2016, law enforcement seized more than 37,000 bottles of alcoholic beverages, worth approximately $300,000, from the Liquor Spot. They also seized nearly $13,000 in U.S. currency from the store, as well as nearly $13,000 and 37 watches and other jewelry items from Aloyan's residence.

In criminal conduct dating back to August 2010 and continuing until April 2016, Hmayakyan fraudulently applied for loans under an alias to obtain a Kia Optima and in a real person's name for luxury cars, including Lexus automobiles, according to the plea agreement. Hmayakyan admitted that he never intended to pay any credit card bills nor made any payments on the loans.

Hmayakyan also admitted that from March 2014 until January 2017, he used fraudulent credit cards in the names of various aliases - including "Liam Sarcozzy" and "Marco Reus" - to purchase plots at Forest Lawn Cemetery in Glendale, which he later sold at a profit.

The total intended loss to which the financial institutions were exposed was $5,232,383, according to the plea agreement.         

• Securities Industry Commentator
• Bill Singer