Securities Industry Commentator by Bill Singer Esq

July 1, 2020

Ex-Husband of 'Real Housewives of New Jersey' Star and Lucchese Crime Family Soldier Indicted for Assault and Other Crimes (DOJ Release)

The Department of Justice Warns of Inaccurate Flyers and Postings Regarding the Use of Face Masks and the Americans with Disabilities Act (DOJ Release)
The FINRA Board of Governors unanimously elected Eileen Murray, former Co-Chief Executive Officer of Bridgewater Associates, LP, as Chairperson to replace the departing William H. "Bill" Heyman. Also, Maureen Jensen, former Chair and Chief Executive Officer of the Ontario Securities Commission and Eric Noll, Chief Executive Officer of Context Capital Partners were appointed to the FINRA Board as public governors, effective at the August Annual Meeting.
Bill Singer's Comment: As I have long argued and will so persist, FINRA's Board of Governors is a non-representative entity nurtured by an indefensible system of gerrymandering whereby over 91% of the organization's member firms (those designated as "Small" and defined as having at least 1 but no more than 150 registered representatives) are restricted to only 3 of 24 seats (less than 13% of the organization's membership). Worse, FINRA's Nominating and Governance Committee, which nominates candidates for Governors, does not have one Small Firm Governor among its seven member committee 
With the exception of Small Firm Governor Stephen Kohn, who is now seeking re-election to a second term, I know of no current Governor who is aggressively supporting efforts to seat a Small Firm Governor on the Nominating Committee. 
Given FINRA's social engineering of its Board and key Committees, and given the ongoing demise of FINRA's overall membership, I refuse to afford this so-called self-regulatory-organization any legitimacy and continue to call for its decertification. Consequently, while I welcome the election of Eileen Murray as Chair, I urge her to rectify the outrageous lack of fair representation on FINRA's Board and Committees.
In a recent FINRA regulatory settlement, a Respondent had failed to timely disclose four felony charges. FINRA sets out a compelling case, which seemed destined to settle with a finding that the Respondent had engaged in willful non-disclosure that would expose her to a statutory disqualification. Surprisingly, there is no such allegation and no such finding. That was a wonderful resolution for the Respondent. Many associated persons with the same fact pattern would likely have been charged with willful non-disclosure and deemed statutorily disqualified. Why didn't FINRA settle this case on that basis? Ahhh . . . that's today's puzzle.

In the Matter of Henry A. Taylor III, Respondent (FINRA AWC 2018059200701)

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, Henry A. Taylor III submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Henry A. Taylor III was first registered in 2003, and from 2013 through March 2017, he was registered with FINRA member firm Cetera Advisor Network, LLC. The AWC alleges that Taylor "does not have any 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 found that Taylor had violated FINRA Rules 3280 and 2010; and the self regulator imposed upon him a $7,500 fine, and a three-month suspension from association with any FINRA member in any capacity. As alleged in part in the AWC:

In early 2017, Taylor and his long-time friend and customer, RB, attended a presentation about an opportunity to invest in a trucking company. After the presentation, Taylor and RB decided to invest $15,000 each to reach the $30,000 minimum investment. On February 15, 2017, RB gave Taylor a $15,000 check for his portion of their joint investment. Taylor deposited RB's check into his personal account, presented the investment promoter with a $10,000 check, and, days later, made a further payment of $20,000 for their joint investment. The trucking company investment was a securities transaction outside the course or scope of Taylor's employment with Cetera. Taylor, however, did not notify Cetera about the transaction, his role in it, and whether he had received or expected to receive selling compensation in connection with the transaction. 

Taylor's failure to provide the required notice to Cetera is aggravated by the fact that he concealed the investment from the firm. In mid-February 2017, Cetera learned that Taylor was either participating or contemplating participating in the trucking company investment. On February 16, 2017, Cetera warned Taylor that any such investment would constitute a prohibited private securities transaction that could result in his termination. Taylor falsely denied making any investment and falsely disavowed any intent to pursue any investment. 

Supreme Court Denies Defendants' Challenge to CFTC's Enforcement Authority (CFTC Release)
On June 29, 2020 the United States Supreme Court denied the Monex Deposit Company Defendant's Petition for a Writ of Certiorari, which sought to challenge the federal regulator's authority to bring enforcement cases against alleged fraud, as had been sustained by th United States Court of Appeals for the Ninth Circuit. As filed in 2017, the CFTC charged the Defendants with defrauding thousands of retail customers out of hundreds of millions of dollars, while executing thousands of illegal, off-exchange leveraged commodity transactions. As set forth in part in the CFTC's Release:

The Ninth Circuit's decision, now final, confirmed (1) that the Commodity Exchange Act (CEA) empowers the CFTC to prosecute fraud in cash-commodity markets regardless of whether there has also been market manipulation; and (2) that in order to escape regulation under the CEA, a purveyor of leveraged retail commodity transactions must actually deliver that commodity, and may not rely on sham arrangements in which no commodity ever changes hands. In Monex's case, the transactions were in metals, but these issues are also important in the context of digital assets including virtual currencies. Earlier this year, the CFTC issued final interpretive guidance on actual delivery for digital assets. [See CFTC Press Release No. 8139-20]

Bill Singer's Comment: 
The 9th Circuit Opinion is a wonderful thing to read: beautifully written and forcefully supported. Everything about that Opinion underscores what constitutes a professional, intelligent bench. Among my favorite passages from that document:

A two-letter conjunction and a two-word phrase decide this case. At stake are hundreds of millions of dollars. Congress, acting shortly after the economy began to stabilize from the financial crisis that began a decade earlier, passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), which amended the Commodity Exchange Act (CEA) to expand the Commodity Future Trading Commission's (CFTC) enforcement authority. This case is about the extent of those powers.

at Page 4 of the 9Cir Opinion

[W]e must decide whether § 6(c)(1) covers fraud claims in the absence of manipulation. The text: 

It shall be unlawful for any person, directly or indirectly, to use or employ, or attempt to use or employ, in connection with any swap, or a contract of sale of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the Commission shall promulgate. 

7 U.S.C. § 9(1).

The crucial question is whether "any manipulative or deceptive device" allows stand-alone fraud claims or requires fraud-based manipulation. The district court determined that the statute unambiguously requires "both manipulative and deceptive conduct, not one or the other." Or, another way to say it, the district court held that "or" really meant "and." We disagree. 

When the word "or" joins two terms, we apply a disjunctive reading. See, e.g., United States v. Woods, 571 U.S. 31, 45-46 (2013). When Congress places "or" between two words, we assume that Congress intended the two terms as alternatives. See Scalia & Garner, Reading Law, § 12 at 116 (2012). While there are exceptions, this is not an instance where a disjunctive meaning would produce absurd results and statutory context compels us to treat "or" as if it were "and." See De Sylva v. Ballentine, 351 U.S. 570, 573 (1956); United States v. Bonilla-Montenegro, 331 F.3d 1047, 1051 (9th Cir. 2003) ("a statute's use of disjunctive or conjunctive language is not always determinative"). We conclude that § 6(c)(1)'s language is unambiguous. Authorizing claims against "[m]anipulative or deceptive" conduct means what it says: the CFTC may sue for fraudulently deceptive activity, regardless of whether it was also manipulative.

at Pages 17 -18 of the 9Cir Opinion

United States Patent and Trademark Office, et al., Petitioners, v. B.V. (Opinion, United States Supreme Court, 19-46, 591 U.S. __(2020))
As set forth in the Supreme Court's "Syllabus":

A generic name-the name of a class of products or services-is ineligible for federal trademark registration. Respondent, an enterprise that maintains a travel-reservation website by the same name, sought federal registration of marks including the term "" Concluding that "" is a generic name for online hotel-reservation services, the U. S. Patent and Trademark Office (PTO) refused registration. sought judicial review, and the District Court determined that ""-unlike the term "booking" standing alone-is not generic. The Court of Appeals affirmed, finding no error in the District Court's assessment of how consumers perceive the term "" The appellate court also rejected the PTO's contention that, as a rule, combining a generic term like "booking" with ".com" yields a generic composite. 

Held: A term styled "" is a generic name for a class of goods or services only if the term has that meaning to consumers. Pp. 6-14. (a) Whether a compound term is generic turns on whether that term, taken as a whole, signifies to consumers a class of goods or services. The courts below determined, and the PTO no longer disputes, that consumers do not in fact perceive the term "" that way. Because "" is not a generic name to consumers, it is not generic. Pp. 6-7. 

(b) Opposing that determination, the PTO urges a nearly per se rule: When a generic term is combined with a generic Internet-domainname suffix like ".com," the resulting combination is generic. The rule the PTO proffers is not borne out by the PTO's own past practice and lacks support in trademark law or policy. Pp. 7-14. 

(1) The PTO's proposed rule does not follow from Goodyear's India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U. S. 598. Goodyear, the PTO maintains, established that adding a generic corporate designation like "Company" to a generic term does not confer trademark eligibility. According to the PTO, adding ".com" to a generic term-like adding "Company"-can convey no source-identifying meaning. That premise is faulty, for only one entity can occupy a particular Internet domain name at a time, so a "" term could convey to consumers an association with a particular website. Moreover, an unyielding legal rule that entirely disregards consumer perception is incompatible with a bedrock principle of the Lanham Act: The generic (or nongeneric) character of a particular term depends on its meaning to consumers, i.e., do consumers in fact perceive the term as the name of a class or, instead, as a term capable of distinguishing among members of the class. Pp. 8-11. 

(2) The PTO's policy concerns do not support a categorical rule against registration of "" terms. The PTO asserts that trademark protection for "" would give the mark owner undue control over similar language that others should remain free to use. That concern attends any descriptive mark. Guarding against the anticompetitive effects the PTO identifies, several doctrines ensure that registration of "" would not yield its holder a monopoly on the term "booking." The PTO also doubts that owners of "" brands need trademark protection in addition to existing competitive advantages. Such advantages, however, do not inevitably disqualify a mark from federal registration. Finally, the PTO urges that could seek remedies outside trademark law, but there is no basis to deny the same benefits Congress accorded other marks qualifying as nongeneric. 

Pp. 11-14. 915 F. 3d 171, affirmed. 

GINSBURG, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, ALITO, SOTOMAYOR, KAGAN, GORSUCH, and KAVANAUGH, JJ., joined. SOTOMAYOR, J., filed a concurring opinion. BREYER, J., filed a dissenting opinion.
In an Indictment filed in the United States District Court for the District of New Jersey, Thomas Manzo and John Perna were each charged with committing a violent crime in aid of racketeering activity and conspiracy to commit a violent crime in aid of racketeering activity. 

SIDE BAR:  Defendant Manzo is the ex-husband of Dina Manzo, who appeared on the Bravo network's "The Real Housewives of New Jersey" for the 2009 and 2010 seasons, returned for the 2014 season, and left in 2015. She was married to Defendant Manzo in 2007, they separated in 2012, and they were divorced in 2016. 

As alleged in part in the DOJ Release:

In the spring of 2015, Manzo, one of the owners of the Brownstone Restaurant in Paterson, New Jersey, allegedly hired Perna to assault his ex-wife's then-boyfriend in exchange for a deeply discounted wedding reception for Perna held at the upscale venue. Perna, who is a "made man" in the Lucchese Crime Family with his own crew, worked with his associates to plan and carry out the assault, which took place in July of 2015. In exchange for committing the assault, Perna held a lavish wedding reception at Manzo's restaurant for a fraction of the price, which was paid by another Lucchese associate and close friend of Manzo's. The wedding and reception, held in August 2015, were attended by approximately 330 people, and included many members of the Lucchese Crime Family.

Separately, prior to the date that Perna was scheduled to begin serving a state prison sentence in January 2016, he falsely reported that his Mercedes Benz was stolen and destroyed. Perna filed an insurance claim for the destruction of the Mercedes Benz in order for the balance due on the Mercedes Benz. However, Perna had staged the vehicle theft and arson with other members of the Lucchese Crime Family.

The charge against Manzo for allegedly falsifying and concealing records related to the federal investigation of the July 2015 assault relates to federal grand jury subpoenas that were sent to the Brownstone Restaurant seeking documents related to the August 2015 Perna wedding reception. Manzo failed to turn over relevant documents in response to those subpoenas and deliberately submitted a false document regarding the reception to the government, along with a false certification. In November 2019, agents with the FBI executed a search warrant at the Brownstone Restaurant and seized invoices for the August 2015 Perna wedding reception and other relevant documents that were not previously turned over.
As belatedly (and, yeah, consider that an "editorial" comment injected into what is ususally a non-editorial portion of the eminent Securities Industry Commentator) noted by the DOJ:

Assistant Attorney General for the Civil Rights Division Eric Dreiband reiterated today that cards and other documents bearing the Department of Justice seal and claiming that individuals are exempt from face mask requirements are fraudulent.

Inaccurate flyers or other postings have been circulating on the web and via social media channels regarding the use of face masks and the Americans with Disabilities Act (ADA) due to the COVID-19 pandemic. Many of these notices included use of the Department of Justice seal and ADA phone number.

As the Department has stated in a previous alert, the Department did not issue and does not endorse them in any way. The public should not rely on the information contained in these postings.

The ADA does not provide a blanket exemption to people with disabilities from complying with legitimate safety requirements necessary for safe operations. . . .

Coming soon to a 3D printer near you: Plant-based steaks (Reuters by Tova Cohen, Silke Koltrowitz)
As set forth in part in the Reuters article:

Israeli start-up Redefine Meat plans to launch 3D printers to produce plant-based steaks mimicking real beef next year in a bid for a slice of the fast-growing alternative meat market. Meat substitutes are increasingly popular with consumers concerned about animal welfare and the environment, boosting sales at Beyond Meat, Impossible Foods and Nestle. Redefine Meat, based in Rehovot, south of Tel Aviv, will first market test its "Alt-Steak" at high-end restaurants this year before rolling out its industrial-scale 3D printers to meat distributors in 2021.

Bill Singer's Comment: I can't possibly be the only person to imagine all the ways that this can (and likely will) go wrong. Among the wonderful possibilities is that it starts printing but it gets jammed and you wind up with a seven foot long cutlet. Of course, imagine how easy it will be for the holidays to "fax" a gift basket of meat to someone via their facsimile machine, which will be connected to a 3D printer. Now if only I knew someone who still used a fax machine. You think that you could send a gift basket of steak via PDF?