Securities Industry Commentator by Bill Singer Esq

October 20, 2021

There Was Little She Could Do -- So Why Was This BOM's Record Marked Up?  ( Blog)
At a bare minimum, we have the right to expect sufficient content and context in a FINRA Arbitration Award so as to render the published document intelligible. Frankly, that's not asking a lot. Unfortunately, there just doesn't seem to be quality review at FINRA once a final draft Award is presented for posting on the regulator's website. In a recent expungement arbitration, it's unclear what was expunged because we don't know what was said by an apparently unhappy customer, and, making things worse, it doesn't appear that the target of the customer's complaint had much, if anything, to do with the underlying transactions or purported losses.
The Department of Justice and the Department of Labor entered into separate settlement agreements with Facebook regarding its use of the permanent labor certification program ("PERM"). DOJ's settlement resolves claims that Facebook routinely refused to recruit, consider or hire U.S. workers, a group that includes U.S. citizens, U.S. nationals, asylees, refugees and lawful permanent residents, for positions it had reserved for temporary visa holders in connection with the PERM process. DOL's settlement resolves issues  related to Facebook's PERM applications filed with the Employment and Training Administration's Office of Foreign Labor Certification ("OFLC"). In part the DOJ Release asserts that:

In December 2020, the Justice Department filed a lawsuit against Facebook, alleging that from at least Jan. 1, 2018, until at least Sept. 18, 2019, Facebook routinely reserved jobs for temporary visa holders through the PERM process. Specifically, the lawsuit alleged that, in contrast to its standard recruitment practices, Facebook used recruiting methods designed to deter U.S. workers from applying to certain positions, such as requiring applications to be submitted by mail only; refused to consider U.S. workers who applied to the positions; and hired only temporary visa holders. According to the lawsuit, Facebook's hiring process for these positions intentionally discriminated against U.S. workers because of their citizenship or immigration status, in violation of the anti-discrimination provision of the Immigration and Nationality Act (INA). The INA generally prohibits employers from discriminating against workers because of their citizenship or immigration status. 

In early 2021, the Labor Department initiated audit examinations of Facebook's pending PERM applications to determine compliance with regulatory requirements. As a result of these audits, OFLC identified potential regulatory recruitment violations and sought additional information from Facebook in an effort to confirm that Facebook followed all applicable regulatory requirements regarding the posting and advertisement requirements for these positions.

Under the DOJ settlement, Facebook will pay a civil penalty of $4.75 million to the United States, pay up to $9.5 million to eligible victims of Facebook's alleged discrimination, and train its employees on the anti-discrimination requirements of the INA. In addition, Facebook will be required to conduct more expansive advertising and recruitment for its job opportunities for all PERM positions, accept electronic resumes or applications from all U.S. workers who apply, and take other steps to ensure that its recruitment for PERM positions closely matches its standard recruitment practices. Today's civil penalty and backpay fund represent the largest fine and monetary award that the Division ever has recovered in the 35-year history of the INA's anti-discrimination provision.   
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Under the DOL OFLC settlement, Facebook will conduct additional notice and recruitment for U.S. workers and will be subject to ongoing audits to ensure its compliance with applicable regulations.
Pursuant to an SEC Order, Credit Suisse AG agreed to pay about $475 million to U.S. and U.K authorities, including nearly $100 million to the SEC, for fraudulently misleading investors and violating the Foreign Corrupt Practices Act ("FCPA") in a scheme involving two bond offerings and a syndicated loan that raised funds on behalf of state-owned entities in Mozambique. As alleged in part in the SEC Release:
According to the SEC's order, these transactions that raised over $1 billion were used to perpetrate a hidden debt scheme, pay kickbacks to now-indicted former Credit Suisse investment bankers along with their intermediaries, and bribe corrupt Mozambique government officials. The SEC's order finds that the offering materials created and distributed to investors by Credit Suisse hid the underlying corruption and falsely disclosed that the proceeds would help develop Mozambique's tuna fishing industry. Credit Suisse failed to disclose the full extent and nature of Mozambique's indebtedness and the risk of default arising from these transactions.

The SEC's order also finds that the scheme resulted from Credit Suisse's deficient internal accounting controls, which failed to properly address significant and known risks concerning bribery.

Pursuant to an SEC Order, the London-based subsidiary of Russian bank VTX  agreed to pay about $6 million to settle SEC charges elated to its role in misleading investors in a second 2016 bond offering. As alleged in part in the SEC Release:

[A]ccording to the SEC's order, the second offering as structured by VTB Capital and Credit Suisse allowed investors to exchange their notes in an earlier bond offering for new sovereign bonds issued directly by the government of Mozambique. But the SEC found that the offering materials distributed and marketed by Credit Suisse and VTB Capital failed to disclose the true nature of Mozambique's debt and the high risk of default on the bonds. The offering materials further failed to disclose Credit Suisse's discovery that significant funds from the earlier offering had been diverted away from the intended use of proceeds that was disclosed to investors. Mozambique later defaulted on the financings after the full extent of "secret debt" was revealed.

The SEC's order against Credit Suisse finds that it violated antifraud provisions as well as internal accounting controls and books and records provisions of the federal securities laws.  Credit Suisse agreed to pay disgorgement and interest totaling more than $34 million and a penalty of $65 million to the SEC. As part of coordinated resolutions, the U.S. Department of Justice imposed a $247 million criminal fine, with Credit Suisse paying, after crediting, $175 million, and Credit Suisse also agreed to pay over $200 million in a penalty as part of a settled action with the United Kingdom's Financial Conduct Authority.

VTB Capital consented to an SEC order finding that it violated negligence-based antifraud provisions of the federal securities laws. Without admitting or denying the findings, VTB Capital agreed to pay over $2.4 million in disgorgement and interest along with a $4 million penalty.

As set forth in part in the "Overview" of the DOJ Report:

The Department is proud of its many accomplishments over the past year documented in this report. In this section, a number of programmatic highlights are described. Fraud and abuse against older adults continues unabated, if not exacerbated, during the pandemic and the ongoing opioid crisis. In the face of these unprecedented challenges, the Department's response in turn has been unrelenting and robust. Learn about the Department's enforcement actions around money mules, how the Department is assisting older victims, new online elder abuse training for law enforcement, public outreach efforts designed to prevent abuse and fraud, a first-ever report by the FBI's IC3 on elder fraud, and the Department's embrace of the new Promoting Alzheimer's Awareness to Prevent Elder Abuse Act of 2020 that amended the Elder Abuse Prevention and Prosecution Act of 2017, designed to increase access to justice for victims with Alzheimer's disease and related dementias.

Encore/Overlapping Risks: Anti-Money Laundering and Cybersecurity (FINRA UnScripted)
As set forth in part in the episode notes:

Firm regulatory risks and priorities don't exist in a vacuum. And that is perhaps nowhere clearer than when it comes to a firm's anti-money laundering responsibilities. A firm's AML risks can overlap with any number of other priorities. 

On this episode, we're looking at the intersection of a firm's AML and cybersecurity risks. Joining us are Jason Foye, a director with FINRA's Anti-Money Laundering Investigative Unit, and Dave Kelley, a director with FINRA's Cybersecurity Specialist Program, both with FINRA's National Cause and Financial Crimes Detection Program.
In a recent federal case, Morgan Stanley raised a number of serious questions about a former employee, but those questions didn't help the firm win a TRO. On the other hand, the former employee is now handicapped in the ensuing race and laboring under the weight of those same questions. Making matters worse, the employee seems to have conceded that some alleged misconduct was an honest mistake.  Not unexpectedly, the parties reached an agreement in the form of a Stipulated Preliminary Injunction Order.
Stockbroker and investment advisor Leon C. Vaccarelli got into the ring with the United States Government and thought he could go the distance against a 21-count Indictment. In the end, Vaccarelli found himself on his back, looking up at the ceiling, and being counted out. Perhaps hearing the bell for the 13th Round of a 12 Round fight, Vaccarelli continued to fight back via a Motion for Acquittal. Sometimes you just gotta know when to stay down.