Securities Industry Commentator by Bill Singer Esq

January 15, 2021

SEC Obtains Final Judgment Against Kerry L. Hoffman (SEC Release)
The SEC issued an Order Determining Whistleblower Award Claims awarding nearly $600,000 to a whistleblower (Claimant #1), and denying Claimant #2's petition for an Award. In making an Award to Claimant #1, the Order notes in part that said Claimant had:

provided new, detailed, and highly valuable information and substantial assistance during the course of an open investigation that significantly contributed to the success of the Covered Action. Claimant 1 met with staff multiple times, provided critical investigative leads, and there is a close nexus between Claimant 1's information and certain of the Commission's charges in the Covered Action. 

In denying Claimant #2's petition, the Order notes in part that:

There is no nexus between Claimant 2's information and the Covered Action. Claimant 2's tip contains no allegations about the Respondents charged in the Covered Action, and the record is clear that the Enforcement staff responsible for the Covered Action did not receive Claimant 2's information directly or indirectly through other Enforcement staff.
The nature of a so-called "demand" loan is that you're not entitled to notice. It's a pay up when we demand repayment. Wall Street's margin loans are creatures of the same stripe. You are extended a loan by your brokerage firm, but if your maintenance margin drops below what is required, the firm can sell whatever needs to be sold in order to protect itself. The firm may give you notice. It may not. Okay, sure, the firm has to exercise reasonableness and good faith, but when a market is crashing and your assets dwindling and full panic mode sets in, you'd be surprised how reasonableness and good faith get stretched. In a recent FINRA arbitration, the onerous nature of margin loans came into play.
DOJ/Antitrust Division completed its review of the proposal by the Institute of International Finance (IIF) to promulgate voluntary guidelines, called the Principles for Debt Transparency (Principles), allowing for public disclosure of information regarding the issuance of sovereign debt. DOJ found that the Principles are unlikely to harm competition, and the Antitrust Division does not presently intend to challenge IIF's proposed Principles.
Read the DOJ January 14, 2021 Letter to IIF
As asserted in part in the DOJ Release:

[IIF] represents a wide constituency in the international finance industry, including approximately 450 members from 70 countries, that had input into the proposed Principles. The department's business review letter recognizes that the current sovereign debt market often lacks transparency, which can lead to increased transaction costs and less efficient pricing. IIF's proposed Principles attempt to remedy those issues by allowing for voluntary and delayed disclosure of some terms from the issuance of sovereign debt.

Bristol Woman Pleads Guilty to Conspiracy to Defraud Financial Institutions (DOJ Release)
Kathleen Littleford, 76, pled guilty in the United States District Court for the Western District of Virginia to one count of conspiracy to execute a scheme to defraud financial institutions to obtain money by false pretenses. As alleged in part in the DOJ Release:

[B]eginning in 2018, Littleford opened a series of bank accounts for the purpose of depositing counterfeit checks and receiving fraudulent transfers of funds from other banking institutions. She did so to assist a man she met online calling himself Frank Peterson. Beginning with his introduction and continuing to the present day, Littleford engaged in an amorous relationship with Peterson, engaging in frequent emailing, text messaging, Facebook messaging, and phone call communications.

"Peterson" made representations to Littleford over the course of their relationship that he made a lot of money in a trade deal in Dubai, that those funds were encumbered by the IRS due to taxes he owed, that he had a lot of money tied up in stocks, and that he needed Littleford's help receiving funds from banking institutions because he could not transfer money himself, due to the IRS claims on his accounts.

Littleford admitted today that premised on Peterson's representations and enticed by a reciprocal love and devotion he showed her, Littleford undertook extraordinary measures to comply with Peterson's fraudulent financial requests. Littleford knew what she was doing was wrong, but knowingly and willfully engaged in the conduct anyway.

Over the course of the scheme, Littleford opened accounts with at least five local banks and fraudulently received move than $190,000 in funds to which she was not entitled.
In a Complaint filed in 2019 in the United States District Court for the Northern District of Illinois, the SEC alleged that Kerry L. Hoffman and another individual raised over $3.3 million through the sale of GT Media, Inc. securities to approximately 46 investors. Allegedly, Hoffman, formerly a registered representative and investment advisory representative at a large nationwide financial firm, solicited advisory clients to invest in the securities, but did not disclose certain financial conflicts of interest, including that he received compensation from GT Media and made short-term loans to the company that were repaid using investor funds. The Court entered final judgment permanently enjoining Hoffman from violations of the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 206(2) of the Investment Advisers Act of 1940, and the broker-dealer registration provisions of Section 15(a) of the Securities Exchange Act, and, further, ordered him to pay $60,000 in disgorgement, $10,788 in prejudgment interest, and a civil penalty of $93,000. Finally, the SEC barred Hoffman from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of penny stock, with the right to apply for reentry after five years.
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, Robert Leslie Mandau submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Robert Leslie Mandau was first registered in 1999, and by 2002, he was registered with Thrivent  Investment Management Inc. The AWC alleges that Robert Leslie Mandau "does not have any relevant disciplinary history." In accordance with the terms of the AWC, FINRA found that Mandau violated FINRA Rules 3270 and 2010. Accordingly, the self regulator imposed upon him a $5,000 fine and a three-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC: 

During the period of January 2012 through December 2019, Thrivent's written supervisory procedures (WSPs) required registered representatives to disclose and receive approval for all outside business activities prior to engaging in the activity and prohibited registered representatives from preparing taxes for firm customers. 

Mandau was aware of the Firm's WSPs, but prepared annual tax returns for friends, family, and three of his Firm customers, without disclosing these outside activities to Thrivent. Mandau received approximately $4,550 in compensation for his tax preparation services. 

Mandau also made false statements to Thrivent regarding his outside business activity in five annual certifications, a written response to an inquiry from his supervisor, and during two branch examinations and the Firm's investigation into his undisclosed outside activities.