SEC Charges Robinhood Financial With Misleading Customers About Revenue Sources and Failing to Satisfy Duty of Best Execution (SEC Release)Connie E. Lee Living Trust, et. al., Plaintiffs, v. James B. Lebenthal, Alexandra Lebenthal, and DOES 1 to 10 inclusive, Defendants (DND Order)
Also READ: "A History Of SOES, Daytrading, NASD, NASDAQ, DOJ, SEC, Congress, And Robinhood -- And A Massachusetts Complaint And Another FINRA Fine" (BrokeAndBroker.com Blog / December 17, 2020)[B]etween 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money - namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as "payment for order flow." As the SEC's order finds, one of Robinhood's selling points to customers was that trading was "commission free," but due in large part to its unusually high payment for order flow rates, Robinhood customers' orders were executed at prices that were inferior to other brokers' prices. Despite this, according to the SEC's order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors. The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission. Robinhood made these false and misleading statements during the time in which it was growing rapidly.
[Gramins] principally oversaw Nomura's trading of bonds composed of sub-prime and option ARM loans. Between 2009 and 2013, Gramins and others defrauded customers of Nomura by fraudulently inflating the purchase price at which Nomura could buy a RMBS bond to induce their victim-customers to pay a higher price for the bond, and by fraudulently deflating the price at which Nomura could sell a RMBS bond to induce their victim-customers to sell bonds at cheaper prices, causing Nomura to profit illegally. Gramins trained subordinates to lie to customers, provided them with the language to use in deceiving customers, and encouraged them to engage in the practice.The victims of this scheme included hedge funds, insurance companies, and asset managers from Connecticut and elsewhere.
at Page 7 of the DND OrderHere, Alexandra contends the Court lacks jurisdiction over her because her only contact with the forum state of North Dakota was to attend an FINRA arbitration in Bismarck, North Dakota, in February 2020. Alexandra submits the Court lacks jurisdiction over her because she did not transact business with any of the Plaintiffs; she did not participate in the 2015 meeting with the Plaintiffs that is the subject of the complaint; she did not have a controlling interest in Holdings, and she did not have an agency relationship with James. The Plaintiffs contend personal jurisdiction is proper over Alexandra through principles of agency. From a careful review of the evidence in the record and pleadings, the Court finds Alexandra did not purposefully avail herself of North Dakota and her contact with North Dakota was random and merely fortuitous in nature.But for Alexandra's presence at the mandated arbitration five years after the 2015 meeting at issue, there is nothing to suggest she "purposefully directed" her activities at the residents of North Dakota. The Court finds that the nature and quality of the contacts with North Dakota does not support the exercise of personal jurisdiction.
Robbi J. Jones and Kipling Jones & Company, Ltd. ("KJC" or the "Firm") (collectively, "Respondents") appeal a Hearing Panel decision issued on October 17, 2018. The Hearing Panel found that Jones caused KJC to willfully create and maintain inaccurate books and records and to file materially inaccurate Financial and Operational Combined Uniform Single Reports Part IIA ("FOCUS reports"). Specifically, between April 2014 and February 2016, Jones filed or caused to be filed materially inaccurate FOCUS reports in which she claimed a $70,000 certificate of deposit ("CD") as an "allowable asset" for the Firm, when the CD had been canceled by the bank. Rather than noting its cancellation, Jones continued to include the cancelled CD as a current asset in the Firm's FOCUS reports, general ledger, and net capital computations, which, in turn, caused KJC's books and records to be inaccurate.The Hearing Panel further found that Jones provided inaccurate and misleading information to FINRA staff and refused to respond to questions FINRA staff asked during her on-the-record testimony ("OTR"). In connection with a 2014 cycle examination, FINRA staff asked Jones to provide documentary support for the reported value of the allowable assets claimed by the Firm in its net capital computation and FOCUS reports. Knowing that the bank had canceled the CD, Jones nonetheless testified that she had never pledged or assigned the CD as collateral. In addition, FINRA staff learned that the City of Houston, a municipal securities client of KJC, was investigating Jones's apparent unauthorized use of a city credit card. In response to FINRA's requests concerning the city's investigation, Jones provided inaccurate and misleading information and documents, and, in certain instances, refused to provide the information.On appeal, Respondents have conceded liability as outlined in the Hearing Panel's decision. Their appeal l therefore focuses on sanctions only. Respondents argue that the sanctions are too severe, punitive, and should be reduced. After an independent review of the record, we affirm the Hearing Panel's findings of liability and modify the sanctions imposed
For the first cause, the Hearing Panel fined KJC $38,000, suspended Jones from associating with any FINRA member firm in any capacity for two years, barred her from associating with any FINRA member firm in any supervisory or principal capacity, and fined her $35,000. Because KJC's violation was willful, the Hearing Panel found that the Firm is subject to statutory disqualification. For the second, third, and fourth causes of action, the Hearing Panel imposed a unitary sanction and suspended Jones from associating with any FINRA member firm in any capacity for two years and fined her $35,000. The Hearing Panel ordered that Jones's suspension under cause one run consecutively with the suspension imposed under causes two, three, and four. . . .
[D]ue to the egregiousness of Jones's misconduct, separate bars in all capacities for both Jones's books and records violations as well as for providing inaccurate and misleading information, documents, and testimony are appropriately remedial.
On June 18, 2019, Cetera filed a Form U5 stating that the firm had discharged Craft after "receiving a demand for payment . . . made pursuant to a client complaint." . . .
From October 2016 through February 2018, Craft executed seven trades, with a total value of approximately $20,333, in a customer's IRA based on instructions Craft received from the customer's mother. These trades included three stock sales liquidating all investments in the customer's IRA in February 2018, which generated approximately $10,000 in proceeds that were distributed out of the account. Craft did not obtain the customer's prior authorization for the trades or a power of attorney authorizing the customer's mother to direct trading in the customer's IRA.