The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

September 2, 2022


































https://www.brokeandbroker.com/6625/tastyworks-zoom-arbitration/
In today's blog, we got a tasty bit of litigation involving a popular brokerage firm that got stiffed by one of its customers. How the jaw-droppin' $2 million debit arose is set out in the arbitration award's fact pattern. As to why that huge debit was not covered by margin maintenance or risk management is not explained. A lot of painful lessons all around -- and some unanswered questions.

https://www.brokeandbroker.com/6636/kovack-securities-finra/
Something does not seem right here. There is a gap between when FINRA knew or should have known of compliance deficiencies at one of its member firms and when FINRA settled its charges via an August 2022 AWC. Was FINRA's investigation influenced by its awareness that an executive from that firm sat on its Board of Governors? We don't know. We should. Ultimately, that's the most troubling issue: FINRA's lack of TRANSPARENCY. 

https://www.osha.gov/news/newsreleases/national/09012022
The United States Department of Labor's Occupational Safety and Health Administration ("OSHA") found Wells Fargo violated the whistleblower protection provisions of the Sarbanes-Oxley Act for improperly terminating a Chicago area-based senior manager in the company's commercial banking segment; and OSHA ordered the bank to pay the employee over $22 million (inclusive of back wages, interest, lost bonuses and benefits, front pay and compensatory damages) As alleged in part in the OSHA Release:

OSHA found Wells Fargo violated the whistleblower protection provisions of the Sarbanes-Oxley Act when it terminated the senior manager who had repeatedly voiced concerns to area managers and the corporate ethics line regarding conduct they believed violated relevant financial laws, including wire fraud. The manager expressed concerns that they were directed to falsify customer information and alleged that management was engaged in price fixing and interest rate collusion through exclusive dealing.

Even though the manager believed the conduct was illegal based on company-required training, they were terminated in 2019. After initially failing to provide a reason for the termination, Wells Fargo later alleged the manager was terminated as part of a restructuring process. However, investigators found the removal was not consistent with Wells Fargo's treatment of other managers removed under the initiative. The employee filed a complaint with OSHA, alleging retaliation under the Sarbanes-Oxley Act.

https://www.justice.gov/usao-sdny/pr/co-founder-and-chief-investment-officer-london-based-hedge-fund-charged-fx-market
https://www.justice.gov/usao-sdny/press-release/file/1530216/download, Neil Phillips was charged with one count of conspiracy to commit commodities fraud, one count of commodities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud in connection with an alleged scheme to artificially manipulate the United States dollar ("USD") / South African rand ("ZAR") exchange rate to fraudulently trigger a $20 million payment under a barrier options contract.  As alleged in part in the DOJ Release:

Background on Hedge Fund-1 and the FX Markets

At all relevant times, PHILLIPS was the co-founder and co-Chief Investment Officer of a hedge fund based in the United Kingdom ("Hedge Fund-1"), which was a global "macro" fund that focused on macroeconomic trends and emerging markets, foreign currency exchange ("FX") markets, and currency and commodity products.  Hedge Fund-1 was at all relevant times a registered commodity pool operator with the Commodity Futures Trading Commission (the "CFTC") and PHILLIPS was himself registered with the CFTC as well.

The FX market is a global market in which participants trade currencies in pairs.  In a currency pair, each currency is valued relative to the other, and the ratio that expresses the value of one currency against the other is referred to as the "exchange rate" or the "rate."  FX "spot" trades involve one party agreeing to receive a particular currency in exchange for delivering a different currency, at an agreed-upon price and quantity. 

The $20 Million One Touch Option

In late October 2017, Hedge Fund-1 purchased a "one touch" digital option for the USD/ZAR currency pair that was set to expire on January 2, 2018.  The option had a notional value of $20 million and a barrier rate of 12.50 ZAR to USD (the "$20 Million One Touch Option").  Under the terms of the $20 Million One Touch Option, if the USD/ZAR exchange rate went below the rate of 12.50 at any point prior to January 2, 2018, Hedge Fund-1 would be entitled to a $20 million payment.  Hedge Fund-1 subsequently allocated a portion of the $20 million notional value to a client ("Client Fund-1"), thereby entitling Client Fund-1 to receive $4,340,000 in the event that the $20 Million One Touch Option was triggered.

Other financial institutions were party to the transaction:  Hedge Fund-1 purchased the $20 Million One Touch Option through a financial services firm ("Intermediary Firm-1") that facilitates trades on behalf of underlying clients; a subsidiary of a bank headquartered in Manhattan, New York ("Bank-1") was obligated to pay the $20 million in the event the $20 Million One Touch Option was triggered; and a bank headquartered in Manhattan, New York ("Bank-2") acted as Hedge Fund-1's prime broker in connection with the $20 Million One Touch Option.

Hedge Fund-1 and Bank-2 entered into a letter agreement that set forth the terms and conditions of the transaction.  This letter agreement provided that Hedge Fund-1 would be "acting in good faith and in a commercially reasonable manner" as the "Calculation Agent" in connection with the $20 Million One Touch Option and that Hedge Fund-1 would determine whether a barrier event occurred in good faith and in a commercially reasonable manner.

PHILLIPS Intentionally Manipulates the USD/ZAR Rate on Boxing Day 2017

With the $20 Million One Touch Option set to expire in a matter of days without having been triggered, on December 26, 2017 (Boxing Day), PHILLIPS engaged in a scheme to intentionally and artificially manipulate the USD/ZAR rate to drive the rate below 12.50 and trigger payment under the $20 Million One Touch Option.  PHILLIPS caused and sought to cause the USD/ZAR exchange rate to fall below 12.50 by engaging in FX spot trades in which he caused hundreds of millions of USD to be exchanged for ZAR.  PHILLIPS engaged in this USD/ZAR FX spot trading for the express purpose of artificially driving the USD/ZAR rate below 12.50.  On December 26, 2017, in the hours that followed the completion of the USD/ZAR FX spot trading directed by PHILLIPS, the USD/ZAR rate once again increased and returned to levels above the 12.50 barrier and did not go below that rate for the remainder of the day.

In particular, during the span of less than an hour between shortly before midnight London time on December 25, 2017 (Christmas day), and approximately 12:45 a.m. London time on December 26, 2017 (Boxing Day), PHILLIPS personally directed a Singapore-based employee ("CC-1") of a bank ("Bank-3") to sell, on behalf of Hedge Fund-1, a total of approximately $725 million USD in exchange for approximately 9,070,902,750 ZAR.  During the course of that approximately one-hour period, PHILLIPS, through his trading, caused the USD/ZAR rate to fall substantially until the rate went just below 12.50.  As soon as PHILLIPS had achieved his objective and the USD/ZAR rate fell below 12.50 due to PHILLIPS' manipulative spot trading activity, PHILLIPS immediately directed that CC-1 cease trading.  PHILLIPS provided trading instructions to CC-1 through Bloomberg chat messages while PHILLIPS was located in South Africa and while CC-1 was located in Singapore.  In these Bloomberg chat messages, PHILLIPS explicitly directed CC-1 to continue selling until the USD/ZAR rate fell below 12.50 and PHILLIPS expressly stated that PHILLIPS' purpose in directing these trades was to drive the USD/ZAR rate below 12.50 stating, among other things, "my aim is to trade thru 50," "[n]eed it to trade thru 50. 4990 is fine," and "[g]et it thru."  Once PHILLIPS was informed by CC-1 that the USD/ZAR had traded at below 12.50, PHILLIPS immediately instructed CC-1 to "stop" trading and asked for proof "of the print."

PHILLIPS Causes the Fraudulent Triggering of the $20 Million One Touch Option

Minutes after PHILLIPS artificially caused the USD/ZAR exchange rate to fall below 12.50 through his manipulative trading, PHILLIPS instructed another employee of Hedge Fund-1 ("CC-2") to notify Intermediary Firm-1 that the $20 Million One Touch Option had been triggered.  Consistent with PHILLIPS' directive, CC-2 contacted an employee of Intermediary Firm-1 to confirm that the $20 Million One Touch Option had been triggered and, in so doing, omitted the fact that the triggering event - the USD/ZAR rate falling below 12.50 - had occurred as a result of the manipulation of the USD/ZAR exchange rate by PHILLIPS.  Furthermore, Bank-2, which was serving as Hedge Fund-1's prime broker in connection with the $20 Million One Touch Option and with whom Hedge Fund-1 had executed the relevant letter agreement governing the transaction, required confirmation from both the executing broker and from Hedge Fund-1 that the $20 Million One Touch Option had, in fact, been triggered.  In this regard, on or about December 27, 2017, an employee of Hedge Fund-1 notified Bank-2, that "[t]he below option level of 12.50 was hit yesterday" and sought to process payment in connection with the triggering of the $20 Million One Touch Option.  This representation by Hedge Fund-1 to Bank-2 that the $20 Million One Touch Option had been triggered likewise omitted the fact that the triggering event - the USD/ZAR exchange rate falling below 12.50 - had occurred as a result of the manipulation of the USD/ZAR exchange rate by PHILLIPS.

As a result of the fraudulent triggering of the $20 Million One Touch Option by PHILLIPS, Hedge Fund-1 ultimately received a wire transfer of $15,660,000 and Client Fund-1 received a wire transfer of $4,340,000. 
https://www.justice.gov/usao-sdca/pr/san-diego-corporate-and-securities-attorney-indicted-securities-fraud-assisting-plann-0
In an Indictment filed in the United States District Court for the Southern District of California, attorney Andrew Coldicutt was charged with securities fraud, false securities registration statements, and wire fraud. As alleged in part in the DOJ Release:

[C]oldicutt worked with other individuals from 2017 through 2019 to prepare and execute a pump-and-dump stock fraud scheme. Coldicutt thought the individuals with whom he was working were associated with a shady hedge fund. In reality, he was working with undercover FBI agents and sources gathering evidence against Coldicutt, the indictment said.

To carry out his role in the scheme, Coldicutt created a sham company and a business model - which supposedly focused on backyard fruit harvesting - and prepared and filed registration statements with the SEC for an initial public offering of the company's stock. According to the indictment, the registration statements contained false and misleading information about the company, its business plans, and the people who owned and controlled the company. 

https://www.justice.gov/usao-cdca/pr/san-bernardino-county-man-sentenced-14-years-federal-prison-multimillion-dollar
Christopher Lloyd Burnell, 51, pled guilty to 11 counts of wire fraud and two counts of filing a false tax return in the United States District Court for the Central District of California; and he was sentenced to 168 months in prison and ordered to pay $7,592,491 in restitution. In sentencing Burnell, Judge Michael W. Fitzgerald described the Defendant as "one of the most evil people that I have ever dealt with in the law." In part the DOJ Release alleges that:

Burnell falsely claimed to have accumulated tens of millions of dollars from lawsuits he purportedly won against the San Bernardino County Sheriff's Department and Kaiser Permanente; from selling a patent for an air-cooled, bullet-resistant vest to Oakley Inc.; and through investments in small businesses and money-lending opportunities. Burnell left the San Bernardino County Sheriff's Department in May 2008. The scheme began no later than November 2010 and continued until September 2017.

After deceiving victims into believing he was a wealthy businessman, Burnell then induced victims to invest up to hundreds of thousands of dollars at a time with him by offering exclusive investment opportunities that promised rates of returns as high as 100% to be repaid in a few weeks. In some instances, Burnell asked the victim for an initial trial investment with him, during which he would fulfill his promised returns - and gain the victim's trust - only to ask for a larger amount from them.

"But these investment opportunities did not actually exist," prosecutors argued in a sentencing memorandum. "Rather, [Burnell] would spend the money on maintaining a life of luxury for himself and his Hooters calendar model girlfriends, gambling, and private jets."

Burnell spent victims' money on gambling and luxury items, including losing more than $2 million in gambling at the San Manuel Casino in Highland, $500,000 in private jet trips, $70,000 on Louis Vuitton merchandise, and $175,000 on luxury cars and an apartment lease for his then-girlfriends. Burnell continued this investment fraud scheme for years until he could not identify new victims to defraud and the money from his victims ran out.

As victims began to raise concerns to him about a lack of repayment and defaults, Burnell claimed that his money had been tied up in a trust fund and his remaining assets had been seized by federal authorities. He then cheated some of the victims out of additional funds by falsely claiming he needed loans to pay for his then-wife's cancer treatment, a child custody dispute with his father-in-law, and other personal expenses.

To alleviate victims' concerns, Burnell showed many victims a fabricated Wells Fargo bank statement that said he had more than $150 million in his account that he would use to pay back victims once his funds were no longer tied up. In truth, Burnell had less than $6,500 in that account.

Burnell's victims lost a total of $7,592,491, which included their retirement and other savings and investment funds. According to court documents, some victims became depressed and suicidal, others lost their businesses, some were forced to sell their family homes and move into smaller residences, some had to tell their children they could no longer pay for their college education, and some suffered marital problems and got divorced. Some victims had their retirement plans shattered.

https://www.sec.gov/litigation/complaints/2022/comp25490-ruiz.pdf, the SEC charged former MJ Capital Funding, LLC board member/sales agent Pavel Ruiz with violating Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 15(a) and 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Ruiz consented to a bifurcated settlement, subject to court approval, under which he will be enjoined from violating the charged provisions of the federal securities laws. The court will determine the amount of monetary relief upon future motion of the SEC. Parallel criminal charges were filed against Ruiz. Previously, the SEC filed a Complaint against MJ Capital Funding, its affiliate MJ Taxes and More, Inc. and principal officer Johanna M. Garcia
https://www.sec.gov/litigation/complaints/2022/comp25490-garcia.pdf . As alleged in part in the DOJ Release: 

[F]from at least June 2020 until August 2021, Ruiz and his team of about 70 sales agents solicited and raised at least $46 million from over 5,100 MJ Capital investors. The complaint alleges that Ruiz and his sales team represented to investors that their money would be used to make small business loans called "merchant cash advances," and that in exchange, investors would receive monthly returns of 10% to 15%. In reality, according to the complaint, Ruiz knew, or was severely reckless in not knowing, that MJ Capital was using new investor money to pay purported returns to existing investors in a classic Ponzi scheme fashion. The complaint further alleges that Ruiz misappropriated or misused about $6.5 million of investor money, a portion of which he spent on various personal expenditures. In addition, the complaint alleges that Ruiz's sales team received at least $5.3 million, and Ruiz directly received another $292,000, in commission payments from MJ Capital for promoting these investments.

https://www.justice.gov/usao-edva/pr/arizona-and-california-men-sentenced-20-million-investment-fraud
As alleged in part in the DOJ Release from the United States District Court for the Eastern District of Virginia:

[F]rom approximately 2011 through 2017, David Alcorn, 78, of Scottsdale, Arizona, and Aghee William Smith II, 70, of Roseville, California, were part of an investment fraud conspiracy that operated out of California, Arizona, Florida, Idaho, and Hampton Roads, among other locations across the country. Alcorn, Smith, and their co-conspirators-including Kent Maerki, 78, and his wife Norma Jean Coffin, 60, of Arizona; Daryl Bank, 51, of Florida; insurance salesman Tony Sellers, 62, of Idaho; insurance salesman Tom Barnett, 69, of California; attorney Billy Seabolt, 56, of Williamsburg; Raeann Gibson, 49, of Florida; and Roger Hudspeth, 51, of Suffolk - deceived hundreds of unsuspecting investors, most of whom were at or near retirement age, by convincing them to invest in or send money to companies owned and controlled by Alcorn, Bank, and Maerki. Alcorn and others then misappropriated significant portions of the investment funds to pay for their criminal enterprise and lavish lifestyles, as well as to pay exorbitant commissions to Smith and other salesmen.

Smith began selling these fraudulent investments in 2011 for Alcorn, Maerki, and Bank. The conspirators used material misrepresentations to sell illiquid, highly speculative investments that were then used as vehicles for fraud. Trusting the conspirators' fraudulent misrepresentations, unsuspecting investors cashed out of 401(k) and other retirement accounts to invest without knowing that Alcorn, Bank, and Maerki were immediately transferring 20%-70% of the funds to other companies they controlled in the form of purported "fees." As a result of this investment fraud scheme, the victims suffered losses in excess of $20 million.

Bank was convicted after trial of conspiracy, mail and wire fraud, selling unregistered securities, securities fraud, and money laundering, and was sentenced in September 2021 to 35 years in prison. Maerki pleaded guilty to conspiracy and was sentenced in March 2021 to 16 years in prison. Seabolt was convicted after trial of conspiracy and mail fraud and sentenced in September 2021 to 10 years in prison. Gibson pleaded guilty to conspiracy and was sentenced in February 2020 to 10 years in prison. Hudspeth pleaded guilty to investment advisor fraud and money laundering and was sentenced in May 2018 to over 12 years in prison. Sellers pleaded guilty to conspiracy and was sentenced in January to 5 years in prison. Coffin pleaded guilty to conspiracy and was sentenced in April to 5 years in prison. Barnett will be sentenced in September.

https://www.justice.gov/usao-sdga/pr/modern-day-bonnie-and-clyde-admit-fraud-charges-related-pilfered-mail-stolen-funds
Michael H. Boatright pled guilty to conspiracy to commit mail, wire, and bank fraud in the United States District Court for the Southern District of Georgia. Previously, Stephanie Michelle Lea Napier pled guilty to conspiracy to commit wire fraud. As alleged in part in the DOJ Release:

[B]oatwright and Napier called themselves the "Modern Day Bonnie and Clyde" when, in a period from about November 2020 to June 2021, they drove around Georgia, South Carolina, and Florida to steal mail from mailboxes, capturing personal identifying information from the stolen mail, and then using that information to gain access and control of their victims' bank accounts.

Using that information, the two stole, or attempted to steal, hundreds of thousands of dollars from victims, including those residing in the Statesboro area, with actual and attempted financial losses of nearly $1.5 million.


Georgia Man Sentenced to Over 7 1/2 Years in Prison for Synthetic Identities Scheme That Defrauded Banks Out of Nearly $2 Million (DOJ Release)
https://www.justice.gov/usao-cdca/pr/georgia-man-sentenced-over-7-years-prison-synthetic-identities-scheme-defrauded-banks
Corey Cato, 41, pled guilty in the United States District Court for the Central District of California to one count of conspiracy to commit financial institution fraud and one count of aggravated identity theft; and he was sentenced to 94 months in prison and ordered to pay $1,908481 in restitution. As alleged in part in the DOJ Release:

No later than 2017, Cato joined conspiracies to defraud banks and illegally possess credit cards. Cato and his co-conspirators created "synthetic identities" by combining false personal information such as fake names and dates of birth with the information of real people, such as their Social Security numbers. Cato and others then used the synthetic identities and fake ID documents to open bank and credit card accounts at financial institutions. Cato and his co-conspirators used the unlawfully obtained credit cards to fund their lifestyles.

As part of the scheme, Cato maintained a commercial mail receiving agency space called "Pak Mail" in Georgia where he and his co-conspirators received correspondence related to the synthetic identities, including bank account and credit card statements, while insulating their personal addresses from detection.

Using a stolen social security number and fake California driver's license, Cato rented an apartment in Atlanta under the name "Jason Brown," where, in February 2019, he possessed credit cards and financial information in the names of synthetic identities like "Adam M. Lopez" and "Carlos Rivera."

The total losses to the banks totaled approximately $1.9 million.

California Man Arrested for $7 Million Securities Fraud (DOJ Release)
https://www.justice.gov/usao-ma/pr/california-man-arrested-7-million-securities-fraud
In a Complaint filed in the United States District Court for the District of Massachusetts, Joseph A. Padilla, 53, was charged with one count of securities fraud. As alleged in part in the DOJ Release:

[P]adilla is a one-time stockbroker who was barred from the securities industry in 2012 by the U.S. Securities and Exchange Commission. It is alleged that, between February and April 2021, Padilla participated in a sophisticated and lucrative pump-and-dump fraud scheme involving the shares of Charlestowne Premium Beverages Inc., a thinly-traded microcap company that traded under the stock ticker symbol FPWM. As part of the scheme, Padilla is alleged to have orchestrated the fraudulent inflation (or "pump") of Charlestowne's stock price using his brokerage account and the accounts of several other individuals. He then allegedly facilitated the sale (or "dump") of millions of Charlestowne's shares at pumped up prices to unsuspecting investors in Massachusetts and throughout the United States.

https://www.sec.gov/news/press-release/2022-154
Without admitting or denying the findings in an SEC Order that Energy Innovation Capital Mangement, LLC ("EIC") had violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, EIC agreed to cease and desist from committing or causing any future violations of these provisions and to a Censure and $175,000 penalty (the company had returned $678,681 plus interest to the funds/limited partners). As alleged in part in the SEC Release:

[E]IC's limited partnership agreements for the two venture capital funds allow it to charge management fees during certain times based on the funds' invested capital in individual portfolio company securities, and require EIC to reduce the basis for these fees if certain events occur, such as write-downs of such securities. The order finds that, from January 16, 2020, through March 31, 2022, EIC overcharged management fees by making a number of errors in its favor. As the order states, the errors include:
  • Failing to make adjustments to its management fee calculations for individual portfolio company securities subject to write-downs;
  • Inaccurately calculating management fees based on aggregated invested capital at the portfolio company level instead of at the individual portfolio company security level;
  • Incorrectly including accrued but unpaid interest as part of the basis of the calculation of management fees for certain investments; and
  • Failing to begin the post-commitment management fee period at the correct date.
In the Matter of the Application of JOHN DOE For Review of Action Taken by FINRA (SEC Order Requesting Additional Written Submissions, '34 Act Rel. No. 95662, Admin. Proc. File No. 3-21013)
https://www.sec.gov/litigation/opinions/2022/34-95662.pdf
The SEC Order presents an interesting issue as to how/whether an individual can obtain "John Doe" confidentiality while pursuing an expungement of his industry record. As set forth in the SEC Order:

On August 12, 2022, a formerly associated person of a FINRA member firm ("Applicant") filed an application for review of FINRA's denial of his request to remove certain information from his Central Registration Depository record. Applicant captioned his filing as being brought by "John Doe," although within the application he "confidentially disclosed to the Commission" his full legal name. Commission Rule of Practice 322 governs confidentiality requests in proceedings such as this by providing that "a party . . . may file a motion requesting a protective order to limit from disclosure to other parties or to the public documents or testimony that contain confidential information."1 Rule 322 further provides that such a motion for a protective order shall be granted only upon a finding that the harm resulting from disclosure would outweigh the benefits of disclosure."2  Here, Applicant neither moved for such an order under Rule 322 nor otherwise addressed the standard set forth in that rule.

Accordingly, it is ORDERED that Applicant supplement his application for review by filing a brief by September 15, 2022, explaining the basis for any request for confidential treatment of his name or other information that he does not wish disclosed. In doing so, Applicant "should clearly identify which information Applicant seek[s] to protect and should offer an explanation as to why the harm resulting from disclosure would outweigh the benefits of disclosure." 3 If Applicant fails to make such a filing, the Commission will publish filings made in this proceeding and information contained therein consistent with its standard practice. . . .

= = = = =

Footnote 1: 17 C.F.R. § 201.322(a); see also Alpine Secs. Corp., Exchange Act Release No. 85245, 2019 WL 1033859, at *1 & n.2 (Mar. 4, 2019) (observing that the Commission has addressed requests for confidentiality under Rule of Practice 322); Laurie Bebo, Exchange Act Release No. 77204, 2016 WL 702363 (Feb. 22, 2016) (addressing request for confidential treatment of information under Rule of Practice 322); https://www.sec.gov/efapdocs/instructions.pdf (providing instructions for filing requests for confidential treatment).

Footnote 2: 17 C.F.R. § 201.322(a); see also Alpine Secs. Corp., Exchange Act Release No. 87599,2019 WL 6251313, at *12 (Nov. 22, 2019) (discussing "the presumption of disclosure under our rules"); Dominic A. Alvarez, Exchange Act Release No. 53231, 2006 WL 328034, at *1 (Feb. 6, 2006) (observing that "[t]he Commission has long underscored the importance of conducting open administrative proceedings"); Rule of Practice 322(b), 17 C.F.R. § 201.322(b) ("Documents and testimony introduced in a public hearing are presumed to be public.").

Footnote 3: Kabani & Co., Exchange Act Release No. 76266, 2015 WL 6447449, at *2 (Oct. 26, 2015) (explaining general process for seeking a protective order under Rule 322). 

https://www.sec.gov/litigation/litreleases/2022/lr25496.htm
https://www.sec.gov/litigation/complaints/2022/comp25496.pdf, the SEC charged POHIH, Inc. its President Kris A. Swaffer, and its Chief Operating Officer Sean K. Williams with violating the registration provisions of Sections 5(a) and (c) of the Securities Act ;and additionally charges Swaffer and Williams with violating the anti-fraud provisions of Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[F]rom at least September 2016 through February 2020, Swaffer and Williams, through POHIH and other now-defunct related entities, raised approximately $14 million from approximately 75 investors in at least 14 states for a start-up marijuana business with operations in Europe, through a series of unregistered securities offerings. According to the complaint, while some funds raised from investors went to fund operations, Swaffer and Williams misappropriated a substantial amount of the investor funds for personal use while also misrepresenting the risks associated with investment. The complaint further alleges that Swaffer misappropriated at least $2.4 million for his personal use between September 2016 and March 2020. The complaint also alleges that Williams, in addition to being aware of Swaffer's misappropriation, misappropriated investor funds for personal use between April 2017 and January 2020.
.
https://www.sec.gov/litigation/litreleases/2022/lr25494.htm
In a Complaint filed in the United States District Court for the Southern District of Texas
https://www.sec.gov/litigation/complaints/2022/comp25494.pdf, the SEC charged Ramas Capital Management, LLC ("RMS") and its managing partner/Chief Investment Officer/Owner Ganesh H. Betanabhatla with violating the anti-fraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. As alleged in part in the SEC Release:

[W]hile acting as investment advisers to a private investment fund they formed, RCM and Betanabhatla made various misrepresentations and misused the fund assets. In particular, the complaint alleges that defendants falsely told the sole fund investor that they had already raised $25 million for the fund, that a well-known and respected energy investor identified by name was involved in the fund and supported the investment, and that the fund was a special purpose vehicle solely set up to invest in a specific portfolio company. The complaint alleges that, in fact, there were no other investors in the fund, the respected energy investor was not involved, and, after receiving the investor's $1 million, the defendants did not make any investment in the portfolio company and instead transferred most of that money to a completely different portfolio company related to one of RCM's earlier private investment funds.

https://www.sec.gov/litigation/complaints/2022/comp25495.pdf, the SEC charged Archer Capital Management Group, the Archer Growth Fund, HDR Management LLC, and Silvermoon Group LLC with violations of the Sections 17(a), 5(a), and 5(c) of the Securities Act and Section 10(b) and Rule 10b-5 thereunder of the Securities Exchange Act. As alleged in part in the SEC Release:

[T]he defendants acted through unidentified agents using fraudulent identities to engage in an internet offering fraud. To induce investment in the Archer Growth Fund, the defendants falsely claimed on their website, www.archerfund.com, among other misrepresentations, that the Archer Fund had an annual rate of return of 47%, that it had beaten the Russell Growth Index for five straight years, and that it was "one of the only High-Watermark Funds available on the market." The SEC also alleges these claims were false. Indeed, the SEC alleges there was no Archer Growth Fund. Investor funds were never invested as promised but instead, the SEC alleges that investor funds were misappropriated by the individuals who orchestrated the scheme for their personal use and to perpetuate the fraud.

SEC Files Subpoena Enforcement Action Against Two Principals of Broadway Musical Fund (SEC Release)
https://www.sec.gov/litigation/litreleases/2022/lr25493.htm
The Securities and Exchange Commission asked the United States District Court for the Southern Distirct of New York to issue an Order directing  Curtis Wayne Cronin and John Joseph, Managing Partners of Broadway Strategic Return Fund, LP, to show cause why the court should not compel them to appear for testimony and produce documents as required by the subpoenas. As alleged in part in the SEC Release:

[T]he SEC is investigating whether Cronin and Joseph or others violated the federal securities laws by, among other things, making materially misleading statements to existing or prospective investors concerning the valuation of the Fund assets, and whether, after the SEC had begun a formal investigation of the Fund, they falsely represented in due diligence questionnaires disseminated to actual or prospective investors that there have not been any investigations of the Fund or the Fund's general partner. As stated in the filing, SEC staff served both Cronin and Joseph with investigative subpoenas requiring the production of certain documents and compelling their testimony. According to the filing, however, and despite numerous attempts to secure compliances with the subpoenas, Cronin and Joseph have refused to produce documents and failed to comply with the testimonial obligations.

https://www.sec.gov/litigation/litreleases/2022/lr25492.htm
The SEC is seeking an Order from the United States District Court for the Southern District of Florida directing Empirex Capital LLC; its sole owner/manager Rafael Alberto Vargas Gonzalez; his sister Paola A. Vargas; and an entity she managed, AKC Management LLC to show cause why the court should not compel them to produce documents or appear for testimony as required by outstanding subpoenas. As alleged in part in the SEC Release;

[T]he SEC is investigating whether Empirex, its officers and others violated the federal securities laws in connection with an unregistered securities offering.  The filing states evidence uncovered in the investigation indicates Empirex and Rafael Vargas may have used AKC - a limited liability company created by Paola Vargas - to raise funds from investors to funnel to Empirex.  As stated in the filing, SEC staff served Empirex, Rafael Vargas, and AKC with investigative subpoenas requiring the production of certain documents and served Paola Vargas with an investigative subpoena compelling her testimony.  According to the filing, despite multiple accommodations by the SEC, Empirex, Rafael Vargas and AKC have failed to comply with the document production obligations of the subpoenas and Paola Vargas has failed and refused to comply with the testimonial obligation of the subpoena.

https://www.sec.gov/news/press-release/2022-153
https://www.sec.gov/litigation/complaints/2022/comp-pr2022-153.pdf, the SEC charged Gregory E. Lindberg, Christopher Herwig, and Standard Advisory Services Limited with violating the antifraud provisions of the Investment Advisers Act of 1940. As alleged in part in the DOJ Release:

[F]rom July 2017 through 2018, Lindberg and Herwig, through Standard Advisory, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients. The SEC's complaint further alleges that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees generated in connection with these schemes. In an attempt to conceal the fraud, Lindberg allegedly orchestrated the schemes through complex investment structures and a web of affiliate companies and allegedly used the proceeds to pay themselves or to divert the funds to Lindberg's other businesses.

Bill Singer's Comment: Not all that crazy about the SEC Release's headline. Is there, in fact, a separate violation for devising an "elaborate" versus a "run of the mill" scheme? 

https://www.sec.gov/litigation/litreleases/2022/lr25489.htm
The SEC asked the United States District Court for the Central District of California to order Ignite International Brands, Ltd. to comply with an investigative subpoena for documents. As alleged in part in the SEC Release;

[T]he SEC is investigating, among other things, whether Ignite violated the federal securities laws by making false or misleading statements in reporting its 2020 financial results. The filing states that the SEC has reason to believe that Ignite improperly recognized and reported certain revenues as part of its 2020 financial statements. The filing alleges that SEC staff served Ignite with an investigative subpoena requiring the production of certain documents, but that, despite multiple accommodations by the SEC staff, Ignite has failed to produce the full set of requested documents.

The SEC seeks an order from the court directing Ignite to show cause why the court should not compel it to produce documents as required by the subpoena. The SEC further seeks an order from the court, following its ruling on the order to show cause, directing Ignite to comply fully with the subpoena. The SEC is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity has violated the federal securities laws.

https://www.sec.gov/litigation/litreleases/2022/lr25488.htm
In a Complaint filed in the United States District Court for the Southern District of New York 
https://www.sec.gov/litigation/complaints/2022/comp25488.pdf, the SEC charged Lee A. Bressler with violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, Section 17(a) of the Securities Act, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the allegations in the SEC Complaint, Bressler agreed to be permanently enjoined from violating these provisions, to be barred from serving as an officer or director of a public company, and to pay a civil penalty of $184,000. As alleged in part in the SEC Release:

[F]rom at least November 2016 through February 2018, Lee A. Bressler served as portfolio manager for the Carbon Master Fund, L.P. The SEC alleges that Bressler represented to investors that the fund followed a conservative investment strategy emphasizing capital preservation and low risk. The SEC further alleges, however, that while making these misrepresentations, Bressler engaged in unauthorized high-risk trading in two undisclosed accounts that were margined against the fund's assets. As alleged, this trading not only violated the fund's stated investment mandate but also exposed the fund's assets to extreme risk of loss, which came to fruition in February 2018. According to the SEC, Bressler's unauthorized trading caused the complete loss of investor capital in the fund.

The United States District Court for the District of New Jersey entered a Final Judgment and Consent Order against Swapnil Rege and SwapStar Capital LLC, and Relief Defendant Reema Rege
https://www.cftc.gov/media/7601/enfregefinaljudgmentandconsentorder090122/download. The Order finds that the defendants engaged in fraudulent solicitation and misappropriation, and that Rege violated a prior CFTC consent order that, among other things, barred him from trading commodity interests for at least three years. The order further finds that Reema Rege received money or profits illegally obtained by the defendants, and is not legally entitled to and has no legitimate claim to such funds. The Order imposes permanent trading and registration bans against the defendants, and requires the defendants and relief defendant to pay, jointly and severally, $4,894,225 in disgorgement and pre-judgment interest of $161,335, with the relief defendant's disgorgement obligation limited to the balances in specified accounts. Further, the Order imposes a permanent injunction prohibiting the defendants from committing further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposes a $200,000 civil monetary penalty. Previously the Court had entered Final Judgments on Consent against the Defendants in a parallel case brought by the SEC. As alleged in part in the CFTC Release:

The order finds the defendants fraudulently solicited individuals to lend or invest money based on material misrepresentations, including: that such funds would be invested; that lenders and investors would receive a fixed return, in some cases as high as 40% to 60%; and that account holders could redeem their funds immediately or on short notice. The order further finds the defendants then used a portion of the solicited funds to trade commodity interests through accounts they owned, or accounts that were nominally owned by Rege's spouse, Reema Rege, but controlled by Rege. The order also finds the defendants misappropriated some of the solicited funds to pay for personal expenses and to pay returns to other account holders in a manner akin to a Ponzi scheme. In addition, the order finds that Rege failed to disclose he was barred for at least three years from trading any commodity interests under the prior CFTC consent order. The order further finds that Rege violated the prior CFTC consent order by continuing to trade commodity interests on or subject to the rules of any registered entity during the three years he was prohibited from doing so.   

https://www.finra.org/sites/default/files/aao_documents/20-00107.pdf
In a FINRA Arbitration Statement of Claim filed in January 2020, public customer Claimants Christina and Erik Elwell asserted negligence; material misrepresentations and omissions; fraud; breach of contract; violations of federal securities laws by unsuitable and unauthorized trading, and  making materially false statements; violations of state Blue Sky Laws and Massachusetts General Laws, Chapter 93A and violations of FINRA, NYSE, NASD and SEC regulations. At the hearing, Claimants sought $34,552,674.00 to $37,761,429.00 in compensatory damages; amounts to be doubled or trebled under Massachusetts statutory law; plus interest, legal fees, and costs. Respondents generally denied the allegations and asserted affirmative defenses. In January 2022, Claimants settled with the Wells Fargo Respondents. The FINRA Arbitration Panel found Respondents Raymond James and Pimental jointly/severally liable and ordered them to pay to Claimants $67,917 in compensatory damages plus interest. The panel denied expungement of the matter from Respondent Pimental's industry records.
Bill Singer's Comment: Okay, sure . . . Claimants won about $68,000. On the other hand, Claimants asked for $30-some-odd-millions in damages. Y'all think that maybe, just maybe, you could find a minute or so before taking off for your Labor Day holidays to pen a few words of explanation as to why you found in Claimants' favor but rendered an Award that was about .0018 (not even 2/10ths of a percent!) of what they were asking by way of damages. Now we all know that the arbitrators on this Panel may well have done some really excellent math and weighed all the evidence, but, c'mon, just toss us a bone here and explain the mark-down. Pouring salt into the Elwells' wounds, the Panel assessed $25,762 in hearing session fees (of the $52,650 generated) against the Claimants. According to online FINRA BrokerCheck disclosures as of August 30, 2022, Wells Fargo settled with Claimants on December 3, 2021, for $325,000.

https://www.finra.org/sites/default/files/fda_documents/2020065107401
%20Robert%20W.%20Baird%20%26%20Co.%20Inc.%20CRD%208158%20AWC%20lp.pdf
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 W. Baird & Co. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Robert W. Baird & Co. has been a FINRA Member Firm since 1971 with about 3,300 registered reps at 270 branches. In accordance with the terms of the AWC, FINRA imposed upon Robert W. Baird & Co. a Censure, $150,000 fine and $266,481 restitution plus interest. As alleged in part in the FINRA AWC:

From June 2019 to December 2020, Baird used a published commission schedule pursuant to which the firm charged commissions on low-principal transactions that were not fair and reasonable. For all equity transactions, Baird imposed a minimum commission of $100, in addition to a handling fee. For example, one customer purchased two shares of Apple Inc., a liquid Nasdaq-traded stock, for a principal amount of $772 and was charged a $100 commission, equating to 13% of the principal amount. As a result of the minimum commission, Baird charged at least $266,481 in unfair commissions, in a total of 7,277 transactions on behalf of 4,623 customers. The commissions charged ranged from over five percent to 93% of the transactions' principal value. The average overcharge per transaction was $37. 

In addition, Baird's supervisory system was unreasonable because in establishing its commission schedule and in setting commissions on transactions, the firm did not appropriately consider the factors set forth in Rule 2121.01 for transactions when the minimum $100 commission was imposed. Specifically, while the firm generally flagged transactions where customers were charged over five percent of principal and reviewed those transactions for excessive commissions, the firm's supervisory system did not flag for review transactions when the firm charged the minimum $100 commission. 

Therefore, Baird violated FINRA Rules 3110, 2121, and 2010. 

https://www.finra.org/sites/default/files/fda_documents/2019063686203
%20Russ%20Kory%20CRD%205901185%20AWC%20lmp.pdf
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, Russ Kory submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Russ Kory was first registered in 2011, and from August 2011 through September 2019, he was registered with David Lerner Associates. In accordance with the terms of the AWC, FINRA imposed upon Kory a $5,000 fine, $7,203 disgorgement plus interest, and a three-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC: 

Between August 2015 and September 2019, Kory recommended that three of his customers invest in one or both of two illiquid limited partnerships sold to customers of David Lerner Associates. Each limited partnership was formed to acquire and develop oil and gas properties located onshore in the United States. The partnerships were "blind pools," meaning at the time of the initial offering the partnership had not identified any properties for acquisition. The partnerships' objectives included making distributions to investors and, five-to-seven-years after the termination of the offering, to engage in a liquidity event. Each limited partnership's ability to make return of capital distributions to its partners and to engage in a liquidity event was substantially dependent on the performance of the properties in which the partnerships invested. Additionally, according to the prospectuses, investments in the partnerships involve a "high degree of risk." 

Kory made unsuitable recommendations to three firm customers. 

PH and SH, a retired married couple, held an investment account at the firm intended, in part, to provide for the long-term care for their disabled adult son. Kory recommended that they invest $382,000 in one of the illiquid limited partnerships. Kory also recommended that senior customer AC invest in one of the limited partnerships. At the time of the recommendation, AC was 86, widowed, unemployed, and living with her daughter and on a fixed income. Kory recommended that AC invest approximately $25,000 in one of the limited partnerships. The third customer, MC, was A C's son-inlaw. MC was over 60, nearing retirement, had limited investment experience, and one of his investment objectives was to preserve funds for retirement. Kory recommended that MC invest $50,000 in one of the limited partnerships. 

Kory's recommendations that the three customers invest in the energy partnerships were not suitable given their investment profiles. Kory received $7,203 in commissions from these investments. 

Therefore, Kory violated FINRA Rules 2111 and 2010. 

https://www.finra.org/sites/default/files/fda_documents/2019063639201
%20Michael%20G.%20Ferrera%20Jr.%20CRD%204865324%20AWC%20lp.pdf
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, Michael G. Ferrera Jr. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Michael G. Ferrera Jr. was first registered in 2004, and from 2005 to March 2020, he was registered with SagePoint Financial, Inc.. In accordance with the terms of the AWC, FINRA imposed upon Ferrera a $15,000 fine and a two-year suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

In July 2019, Ferrera engaged in an undisclosed outside business activity related to one of his SagePoint customers, a recently widowed eighty-three year old who was having trouble managing her affairs on her own. Ferrara purported to provide "estatemanagement" services to the customer including lawn care, house maintenance, personal organization, and "concierge services," which Ferrera claimed could include almost anything the customer might want or need. Ferrera charged the customer $20,000 for five years of such services. In the days after depositing the customer's $20,000 check, Ferrera began performing limited services organizing the customer's mail and personal papers. Ferrera did not provide SagePoint with written notice of the business activity prior to engaging in it. He therefore violated FINRA Rules 3270 and 2010.
. . .

Shortly after Ferrera deposited the customer's $20,000 check, the customer's bank investigated then reversed the transaction. The customer then complained in writing to SagePoint and FINRA, prompting both the firm and FINRA to investigate. In both investigations, Ferrera knowingly gave false and misleading answers suggesting his estate-management activities amounted to an established business when, in reality, Ferrera's SagePoint customer was his first and only estate-management client. 

Specifically, during SagePoint's investigation, a firm supervisor asked Ferrera when he had begun performing estate-management activities, how much he had earned from those activities, and how many individuals he had provided services for in the past. Ferrera responded in writing by falsely stating that he began performing the estate-management services in the first quarter of 2019, about six months before depositing the check from his SagePoint customer; he had earned $50,000 in total from his estate-management activities; and he had provided similar services for two individuals in the past. As a result of SagePoint's investigation, Ferrera completed the firm's standard outside business activity disclosure form on which he reiterated that he had begun performing estatemanagement services in the first quarter of 2019. Ferrera likewise made similar false and misleading statements to FINRA staff during an exam. Ferrera knew that each of those statements to SagePoint and FINRA staff was false and misleading. 

Ferrera later gave truthful testimony pursuant to FINRA Rule 8210 in this matter about the issues he previously had misrepresented. 

Ferrera therefore violated FINRA Rule 2010. 

https://www.finra.org/sites/default/files/fda_documents/2019064308401
%20Acorns%20Securities%2C%20LLC%20CRD%20168172%20AWC%20va.pdf
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, Acorns Securities, LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Acorns Securities, LLC has been a FINRA Member Firm since 2014 with 27 registered representatives at one branch. In accordance with the terms of the AWC, FINRA imposed upon Acorns Securities, LLC a Censure, $200,000 fine and an undertaking to certify compliant supervisory systems/written supervisory procedures. As alleged in the "Overivew' portion of the AWC:

Between July 2017 and December 2021, Respondent sent to approximately 25,000 customers approximately 56,000 account statements containing inaccurate information about their cash balances and securities holdings in violation of FINRA Rules 2210(d)(1)(B) and 2010. During the same period, in addition to inaccurate account statements, the firm also maintained internal books and records that contained inaccurate information about customers' securities holdings and cash balances in violation of FINRA Rules 4511 and 2010. Additionally, throughout the period, the firm failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with FINRA Rules 2210 and 4511 in violation of FINRA Rules 3110 and 2010. 

https://www.finra.org/sites/default/files/fda_documents/2019062419801
%20John%20Charles%20Barnes%20CRD%20862738%20AWC%20lp.pdf
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, John Charles Barnes submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that John Charles Barnes was first registered in 1985, and by November 2002, he was registered with RBC Capital Markets, LLC. In accordance with the terms of the AWC, FINRA imposed upon Barnes a $5,000 fine and a one-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

From May 2016 to March 2019, Barnes exercised discretion without written authorization in 432 transactions in the accounts of 9 customers. Each of the customers gave Barnes express or implied authorization to exercise discretion in his or her accounts. However, at the time of the transactions at issue, none of the customers had given Barnes written authorization to exercise discretion in his or her accounts, and RBC had not accepted the accounts as discretionary. 

Therefore, Barnes violated NASD Rule 2510(b) and FINRA Rule 2010.

https://www.finra.org/sites/default/files/fda_documents/2020066887901
%20Miguel%20Angel%20Murillo%20CRD%204875997%20AWC%20va.pdf
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, Miguel Angel Murillo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Miguel Angel Murillo was first registered in 2005, and by November 2014, he was registered with Joseph Stone Capital L.L. C. The AWC discloses in part under "Background" that [Ed: footnote omitted]:

In June 2011, FINRA accepted an Offer of Settlement from Murillo in which he consented to findings that he excessively and unsuitably traded and unsuitably recommended the use of margin in a customer's account, in violation of NASD Rules 2110, 2310, and IM-2310-2. Through that Offer of Settlement, Murillo was suspended from associating with any FINRA member firm in all capacities for 20 business days and ordered to pay restitution of $35,000.

In accordance with the terms of the AWC, FINRA imposed upon Murillo a $5,000 fine and a eight-month suspension from associating with any FINRA member in all capacities. The AWC did not impose an order of restitution because Joseph Stone Capital agreed to pay commissions/trading costs charged to Customer A - E. The AWC alleges in part that:

During the relevant period, Murillo engaged in quantitatively unsuitable trading in five customers' accounts. Murillo caused one such customer, Customer A, to place 60 trades in his account between September 2016 and December 2018, with a total principal value of more than $800,000. During that period, Customer A's average monthly equity was less than $25,000, yet Murillo's recommended trades caused the customer to pay more than $17,000 in commissions and other trade costs. Murillo's recommendations resulted in an annualized cost-to-equity ratio of approximately 30 percent-meaning that Customer A's account would have had to grow by more than 30 percent annually just to break even. 

Murillo recommended similarly unsuitable and excessive trading in four other customers' accounts. 
  • Murillo caused Customer B to place 35 trades in his account between January 2017 and September 2019. Although Customer B's account had an average monthly equity of approximately $13,000, Murillo's recommended trades caused him to pay more than $12,000 in commissions and other trade costs and resulted in an annualized costto-equity ratio of more than 38 percent. 

  • Murillo caused Customer C to place 100 trades in his account between January 2015 and September 2018. Although Customer C's account had an average monthly equity of approximately $63,000, Murillo's recommended trades caused him to pay more than $39,000 in commissions and other trade costs and resulted in an annualized costto-equity ratio of more than 25 percent. 

  • Murillo caused Customer D to place more than 35 trades in his account between January 2015 and January 2016. Although Customer D's account had an average monthly equity of approximately $29,000, Murillo's recommended trades caused him to pay more than $15,000 in commissions and other trade costs and resulted in an annualized cost-to-equity ratio of more than 47 percent. 

  • Murillo caused Customer E to place more than 45 trades in his account between January 2017 and October 2017. Although Customer E's account had an average monthly equity of approximately $11,000, Murillo's recommended trades caused him to pay more than $17,000 in commissions and other trade costs and resulted in an annualized cost-to-equity ratio of more than 58 percent. 
Each of the customers described above relied on Murillo's advice and accepted his recommendations. Those recommended transactions, which collectively caused Customers A through E to pay $101,508.10 in commissions and other charges, were excessive and unsuitable. Therefore, Murillo violated FINRA Rules 2111 and 2010.

https://www.finra.org/sites/default/files/fda_documents/2020066841402
%20Kyle%20Luebeck%20CRD%205931863%20AWC%20lp.pdf
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, Kyle Luebeck submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Kyle Luebeck was first registered in 2011 with Mutual of Omaha Investor Services, Inc.. In accordance with the terms of the AWC, FINRA imposed upon Luebeck a $5,000 fine and a 10-business-day suspension from associating with any FINRA member in all capacities. The AWC alleges in part that:

In May 2020, in anticipation of joining another FINRA member firm, Luebeck improperly removed his customers' nonpublic personal information from Mutual of Omaha, without Mutual of Omaha's or the customers' knowledge or consent. Specifically, on May 14 and May 15, 2020, while associated with Mutual of Omaha, Lue beck sent emails from his Mutual of Omaha email account to an outside email account that he controlled. The emails contained customers' nonpublic personal information as defined by Regulation S-P that Luebeck received as part of his employment with the firm. Luebeck retained this information after the termination of his association with Mutual of Omaha during which time he was not entitled to possess the information. Among other things, the emails contained customers' dates of birth, social security numbers, investment account numbers, life insurance policy numbers, tax filings, and a driver's license number. Luebeck resigned from Mutual of Omaha on May 15, 2020, and associated with another FINRA member firm the same day. 

By virtue of the foregoing, Luebeck failed to observe high standards of just and equitable principles of trade in violation ofFINRA Rule 2010.

https://www.finra.org/sites/default/files/fda_documents/2021071880201
%20Ossama%20Mohamed%20Helal%20CRD%20No.%205282088%20AWC%20gg.pdf
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, Ossama Mohamed Helal submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Ossama Mohamed Helal was first registered in 2007, and by 2015, he was registered with The Huntington Investment Company. In accordance with the terms of the AWC, FINRA imposed upon Helal a $5,000 fine and a three-month suspension from associating with any FINRA member in all capacities. The AWC alleges in part that:

In June 2015, Helal sought approval to engage in an outside business activity as a tax preparer. In July 2015, Huntington informed Helal that his outside business activity would not be approved. 

Helal was aware of the firm's WSPs and that his request for approval had been denied, but worked as a tax preparer earning approximately $60,000 in compensation for the tax years 2015 through 2020.

Helal also made false statements to Huntington regarding his outside business activity in quarterly compliance acknowledgements and annual compliance certifications between October 2015 and May 2021. 

Therefore, Helal violated FINRA Rules 3270 and 2010. 

https://www.finra.org/sites/default/files/fda_documents/2020068358801
%20Simon%20Dude%20Granner%20CRD%20No.%205819063%20AWC%20gg.pdfFor 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, Simon Dude Granner submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Simon Dude Granner was first registered in 2010 with Thrivent Investment Management, Inc. In accordance with the terms of the AWC, FINRA imposed upon Granner a $5,000 fine and a three-month suspension from associating with any FINRA member in all capacities. The AWC alleges in part that:

Between January and September 2020, Granner failed to timely and fully disclose an outside business activity for which he received compensation. In early January 2020, without providing prior written notice to Thrivent, Granner formed a consulting services company. Granner was aware that Thrivent's written supervisory procedures required its associated persons to provide written notice and receive prior approval for all outside business activities. When Granner belatedly sought his firm's approval of his outside business activity in late February 2020, he failed to fully disclose the nature of his business. Specifically, he failed to disclose that through this business he would provide financial sales coaching and training to Thrivent-registered persons, activities he knew or should have known his firm would not approve because the firm prohibits third-party financial sales training and had denied Granner's prior request for approval of substantially similar outside business activity in 2019. 

Nonetheless, Granner solicited 186 firm-registered persons to become coaching clients of his consulting business, of which nine became clients who paid Granner approximately $28,000. Granner also falsely attested in an annual compliance questionnaire that he had completely and accurately disclosed his outside business activities to the firm. 

Therefore, Granner violated FINRA Rules 3270 and 2010.  

https://www.finra.org/sites/default/files/fda_documents/2019063382601
%20Christopher%20Stephen%20Perrillo%20CRD%204867894%20AWC%20gg.pdf
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, Christopher Stephen Perrillo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Christopher Stephen Perrillo was first registered in 2004, and by 2018, he was registered with Joseph Stone Capital L.L.C. In accordance with the terms of the AWC, FINRA imposed upon Perrillo a $5,000 fine and a three-month suspension from associating with any FINRA member in all capacities. The AWC includes this acknowledgement:

Respondent understands that this settlement includes a finding that he willfully omitted to state a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this omission makes him subject to a statutory disqualification with respect to association with a member.
  
The AWC alleges in part that:

In January 2020, Perrillo learned of, through correspondence from FINRA, two unsatisfied liens filed against him. Specifically, Perrillo learned of an unsatisfied lien against him by the homeowner's association of his condominium in the amount of $8,890.14 and an unsatisfied tax lien against him by the State of Tennessee in the amount of $634.97. Although Perrillo was required to disclose the unsatisfied liens via the filing of an amended Form U4 within 30 days of learning of them, he never amended his Form U4 to disclose these liens. 

On or around January 28, 2020, Perrillo learned that a civil judgment had been entered against him in the amount of $355,014. The judgment remained outstanding against him until October 2021. Although Perrillo was required to disclose the unsatisfied judgment via the filing of an amended Form U4 within 30 days of learning of it, Perrillo never amended his Form U4 to disclose this judgement. 

In September 2021, Perrillo filed a bankruptcy petition. Although Perrillo was required to disclose the bankruptcy petition via the filing of an amended Form U4 within 30 days, he never amended his Form U4 to disclose it. In November 2021, the bankruptcy was dismissed after Perrillo filed a Notice of Voluntary Dismissal. 

By willfully failing to disclose the judgment, two liens, and bankruptcy petition, Perrillo violated Article V, Section 2(c) of FINRA's By-Laws and FINRA Rules 1122 and 2010.

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