Securities Industry Commentator by Bill Singer Esq

September 13, 2022

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Given all the fraud that has emanated from FINRA's member firm broker-dealers in recent decades, the investing public needs someone on the ramparts of Wall Street -- vigilant, on-watch, alert. Clearly FINRA has the staffing to do the job, but does FINRA get the job done? At first glance, a recent million-dollar settlement suggests that FINRA is a vigilant regulator; however, after further scrutiny, that same settlement exposes FINRA as little more than a toll-booth on Wall Street.  

September 13, 2022  DMCA 
Takedown Notice
Prior 2020 DMCA Notice Reversed

The "" and "Securities Industry Commentator"
Are Each Published 
With A Copyright Notice 
And Contain Original Content
Authored by Bill Singer, Esq. 
and Published on,,  and

I, BILL SINGER, am a lawyer who represents securities-industry firms, individual registered persons, Wall Street whistleblowers, and defrauded public investors. 

For over three decades, I represented clients before the American Stock Exchange, the New York Stock Exchange, the Financial Industry Regulatory Authority (formerly the NASD), the United States Securities and Exchange Commission; in criminal investigations brought by various federal, state, and local prosecutors; and I have the distinction of representing witnesses during Congressional investigations. In 2015, I achieved a significant award of approximately $1.5 million from the Securities and Exchange Commission on behalf of a whistleblower client, who was the first in-house compliance officer to be declared eligible under the rigorous Dodd-Frank exemptions. 

I am presently Of Counsel to a law firm. Before entering the private practice of law, I was employed in the Legal Department of Smith Barney, Harris Upham & Co.; as a regulatory attorney with both the American Stock Exchange and the NASD (now FINRA); and as a Legal Counsel to Integrated Resources Asset Management. I was formerly Chief Counsel to the Financial Industry Association; General Counsel to the NASD Dissidents' Grassroots Movement; and General Counsel to the Independent Broker-Dealer Association. During my four-decades on the Wall Street regulatory scene, I have been a vocal advocate for securities industry reform and investors rights. I oppose mandatory arbitration for investors and associated person, and am a leading critic of the present form of self-regulation.

Since 1989, I have been a law firm Partner/Of Counsel whose core areas of concentration in securities-industry law are Regulatory/Compliance; White-Collar Criminal; Membership Applications; Issuer Listings; Litigation/Arbitration; and Congressional Investigations. For a number of years, I was a Series 7 and Series 63 stockbroker. Also, I served as a Hearing Officer for the New York City Environmental Control Board and a Business Editor for Prentice-Hall, Inc.

From 1997 to 2011, I was the author of Registered Rep. Magazine's "Street Legal" column. From 2009 to 2013, I authored the "Street Sweeper" column for  For several years I was the author of the "Summary Discipline" column for Institutional Investor / Wall Street Letter. Also, I hosted the "Side Bar" (Thomson Reuters) and "Case in Point" (Penton/ video series during which I interviewed leading broker-dealer, investment advisory, and industry compliance guests. 

I am the founder/publisher of the Securities Industry Commentator,, and the Blog, which was rated as one of he industry's top eight destination websites and the leading legal/regulatory blog by "Investment News." 

The Securities Industry Commentator was launched in November 1998 under the website.

The Blog was launched on or about April 25, 2005, and has published over 6,000 posts since that time.  

Starting in late December 2019/early January 2020, my webmaster informed me that my websites had been victimized by what appeared to have been a DDoS attack. He noted that a large number of files had apparently been copied, and he promptly took measures to deny access to certain sources and monitored the ongoing attacks until he believed that they had subsided.  Sometime on or about January 8, 2020, my Host informed me that its Abuse Department had received a DMCA takedown notice  My BrokeAndBroker blog article cited in the DMCA takedown notice, "What Is On First? No, What Is On Second. Who Is In Arbitration," was the 318th posted by me and contained content that I personally authored over a decade ago  on February 25, 2010, as noted in the posted content. As is set forth on the bottom of the page at issue and on all similarly published content: & Securities Industry Commentator™ © Copyright 1998-2022 Bill Singer. Third party Trademarks, graphics, and/or content are the property of their respective owners.

The alleged infringed-upon article cited by the DMCA takedown notice was The article claiming infringement is located under a website titled "Fastest," which appears to be emanating from India and authored by an "Orlando Ruiz"

The purportedly infringed-upon article discusses an arcane Wall Street legal issue and has no discernible relationship to the other content posted on the Fastest site. Pointedly, I assert that the Blogspot/Ruiz article is populated with content that has been stolen from my archive and re-posted. In addition to the fact that the Blogspot article is a virtual verbatim re-post of my copyrighted intellectual property, it clumsily failed to eliminate a reference/attribution to me by my name ("Bill")  in their re-published article: 

Don't Leave Me This Way. I Can't Survive, Can't Stay Alive

But Bill, you plead and beseech of me, don't leave us this way (with all respects to Gloria Gaynor).  Surely, surely the FINRA Arbitrator at least explained the point of the 2006 Settlement Agreement.  Just give us that much, you beg of me.  Okay, just to toss you one last bone, here is the Arbitrator's definitive explanation of the 2006 Settlement Agreement:

If the so-called Orlando Ruiz had written the 2010 article, the "But Bill" reference above should have been "But Orlando." It's hard to point out a more glaring example of why the article at issue was authored by "Bill Singer" and not "Orlando Ruiz." Similarly, it's hard to imagine a more compelling proof upon which a DMCA Takedown should be denied.

Because the Fastest/Blogspot site appears distributed by Google's Blogger, I filed a request with Google and with Lumen to take down the infringing Orlando Ruiz article. I informed Google and Lumen that I believe that there is no real "Orlando Ruiz," and that said attribution is wholly fictitious. Moreover, there is no online history of any Wall Street legal, regulatory, or compliance content attributed to such an author by the name of Orlando Ruiz but there are some 20-plus years of such authorship attributed to Bill Singer. 

As is an all too common result for content published on the Internet, the DMCA notice was honored against my copyright material, and in response to threats from Google to de-index my site and cease AdSense revenue, I removed my "318" article from its published state but it remains on my content management system in unpublished form. I intend to re-publish it when this issue is finally resolved; however, I harbor no illusions as to how long that process may take. That being said, should this outrageous effort to silence me persist, I will continue to re-post and re-post the essential elements of the FINRA Lombard v. GunnAllen Arbitration Decision in order to thwart any effort to censor my content. What was once a ten-year-old article of little interest to anyone, is now revitalized via this 2020 content. If an aggrieved party or non-party had simply contacted me in 2020, explained why my 2010 article was an issue for them, and provided some compelling reason for the deletion or redaction of his or her name, I may well have been persuaded to offer some accommodation. I never received any such communication. 

I suspect that someone retained a so-called "Reputation" defense company, which misused the DMCA takedown process as a way to delete an unwanted, negative reference from the Internet. There is much literature on this despicable practice and there are growing complaints about the manner in which takedowns are approved and executed. The abuse of this process likely protects the reputations of many fraudsters and criminals, and probably extends to those who are just discomforted by having their name online. I have absolutely no idea as to who may be behind the DMCA notice pertaining to the 2010 FINRA arbitration that I reported, and I have no idea as to their purpose. Be that as it may, the effort failed because I have posted a new story about the same case!  In the event that I continue to receive DMCA notices for this story and am forced to un-publish my original, copyrighted content should my appeals fail, I will re-write a new article detailing the very same litigation -- and I will do so as long as I am alive.

As noted in the Official Lombard v. GunnAllen FINRA Arbitration Decision, in 2009, public customer Jay Lombard asserted claims for breach of fiduciary duty, omission of facts, and failure to supervise, which Respondents GunnAllen and Soiferman denied. Claimant Lombard sought $100,000 in compensatory damages and $40,000 in interest. Respondents GunnAllen and Soiferman requested dismissal of the claims. In January 2010, Claimant Lombard withdrew his claims against Respondent Soiferman and attempted to amend his Statement of Claim to add a Jamie Diaz as a new Respondent, which the sole FINRA Arbitrator denied.

In response to remaining Respondent GunnAllen's January 22, 2010, Motion to Dismiss, the sole FINRA Arbitrator dismissed Claimant Lombard's claims as against remaining Respondent GunnAllen. In his rationale, AND QUOTING FROM THE PUBLISHED FINRA ARBITRATION DECISION, the FINRA Arbitrator stated at

1. During July 2004 the Claimant, for his retirement account with GunnAllen had purchased in a private placement, as an "Accredited Investor", one Unit of Florida Capital Apartments 2004, Ltd. That purchase and Claimant's subsequent retention of that investment form, in alt their aspects, the gravamen of Claimant's Statement of Claim in this matter. It now appears that in March 2006 Claimant and GunnAllen had entered into a written Settlement Agreement and Release dated March 7, 2006 (the "Agreement" included as part of Exhibit C to Respondent's motion papers) with reference to a dispute that had arisen between them concerning certain alleged improprieties with respect to Claimant's account at GunnAllen, expressing their "desire to compromise and settle all claims, causes of action, injuries, and damages asserted or that may be asserted [emphasis added]" and providing for payment of $5,547.00 to Claimant by GunnAllen, in full settlement. The precise nature of the unspecified improprieties is nowhere described, and has not been identified by either party, apart from their both agreeing that it was completely unrelated to Claimant's July 2004 investment that is the subject of this arbitration proceeding. 

2. The Agreement further states that its "[p]erformance.. .will operate as a genera/ release [emphasis added] by and between GunnAllen and Claimant and their present and former representatives." Nowhere is this "general release" qualified or limited In any way to reference to any specific claim or any kind of claim; as written (and despite its being far from a model of legal draftsmanship in most respects), agreed to and fully performed it is sufficiently broad in its reach to include the claims made by Claimant in his Statement of Claim, which have to do with a transaction entered into almost two years prior to the settlement and are plainly "claims . . . that may be asserted", as indeed they have been, subsequent to execution of the Agreement. The Agreement was signed by both parties, and the required payment was made to Claimant a few days following its execution. 

3. Claimant now asserts that his signature to the Agreement was procured by fraud on the part of GunnAllen's registered representative Jaime Diaz, and that he did not at all understand its purpose or effect as a general release, but was assured that it was simply a document he was required to sign in order to obtain the promised payment, which he did. However, the final paragraph of the Agreement, which Claimant, hardly an uneducated person, indeed a physician, must conclusively be presumed to have read and understood, states in relevant part immediately preceding its signatures that "all parties having consulted legal counsel, or having been advised to consult legal counsel, and having had full opportunity to do so, [emphasis added] . . .hereby acknowledge that the provisions of this Agreement shall be binding upon themselves and respective heirs and next of kin, executors, and administrators." Their respective signatures appear directly below, with Claimant's signature dated March 25, 2006, and that of Jay Marc Israel, Esq., attorney for GunnAllen, dated March 27, 2006. Neither party can now claim not to be bound by the Agreement in any respect. Claimant has admitted that he has at no time sought legal advice concerning the settlement or the Agreement itself, or in connection with his commencement of or participation in any other aspect of the arbitration proceedings in this matter; Claimant asserts that in all respects he was bamboozled by Jaime Diaz, whom he has only now named as a Respondent.

Man Sentenced to 135 months for Operating a "Ponzi" Scheme and Committing Securities and Bank Fraud (DOJ Release)
After a jury trial in the United States District Court for the District of Puerto Rico, Carlos Maldonado (owner of Business Planning Resources International Corporation ("BPRIC"), Glorimar Fashions and Tailoring, LLC, Global Business Insurance Agency Inc., and associated under the incorporation documents with Pet Card Systems, Inc., and Datavos Corporation) was found guilty on 16 counts of securities fraud and bank fraud. Maldonado was sentenced to 135 months in prison plus five years of supervised release, and ordered to pay $1,986,734.26 in restitution. As alleged in part in the DOJ Release:

The jury found that, from on or about the year 2007 through the year 2012, Carlos Maldonado along with several associates fraudulently solicited and procured over $5,000,000 on behalf of BPRIC from over 100 individuals and other businesses. As part of the fraudulent scheme, Maldonado and his associates provided phony Investment Contracts to victims in Puerto Rico and the Continental US in exchange for their monetary investment in his bogus business enterprises.

During trial, the government presented checks, bank records, emails, other documentary evidence, and witness and victim testimonies that proved that the defendant made or caused materially false and misleading representations to be made to investors, including: (i) that the various companies were involved in legitimate business functions―which he knew not to be true; (ii) failing to disclose to investors that their funds would be used to buy and trade stocks and commodities on a ScottTrade account, Foreex Capital markets, LLC, and other personal trading accounts, and for Maldonado's family expenses instead of funding the bogus business ventures; and (iii) failing to disclose that the investment funds fraudulently obtained were to be used by Maldonado to purchase goods and services at retail stores, restaurants, and spend money for travel, rent, entertainment, and personal auto loan payments.
In a Complaint filed in the United States District Court for the Central District of California, the SEC charged Marc J. Frankel with violating the antifraud provisions of the Investment Advisers Act. As alleged in part in the SEC Release:

[B]etween December 2017 and June 2020, Frankel stole more than $743,000 from two clients, including a Major League Baseball player. Frankel allegedly used their funds to pay personal charges on a credit card in the name of his deceased mother. As alleged in the complaint, those charges included sports tickets, college tuition for Frankel's children, travel, jewelry, and electronics. Frankel allegedly made several small payments each month in order to evade detection and took other steps to conceal the fraud, such as falsely claiming that the payments were for a credit card held by the baseball player's personal assistant.

Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95748; Whistleblower Award Proc. File No. 2022-83)
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending that joint claimants (referred to as "Claimant") receive a Whistleblower Award for about $500,000.The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

[(i)] Claimant's information was significant, as it resulted in Commission staff initiating an investigation into misconduct that Redacted ("Company") engaged in, and it ultimately led in part to the Covered Action; (ii) Claimant submitted information and documents to Commission staff, participated in interviews with Commission staff, and helped Commission staff identify key individuals and entities involved in the investigation; (iii) Claimant's information and assistance helped Commission staff focus its investigation into the Company and helped the Commission conserve significant time and resources; and (iv) Claimant raised Claimant's concerns internally at the Company in efforts to remedy the relevant misconduct.
Without admitting or denying the findings in respective SEC Orders, 
settled the charges, and agreed to a Censure and to cease and desist from future violations of Rule 15c2-12 under the Securities Exchange Act of 1934, which establishes disclosures that must be provided to investors, as well as Municipal Securities Rulemaking Board (MSRB) Rule G-27 and Section 15B(c)(1) of the Exchange Act. Further, the Respondents agreed to the following monetary relief:

  • BNY: $656,833.56 disgorgement plus prejudgment interest and a $300,000 penalty;
  • TD: $52,955.92 disgorgement plus prejudgment interest and a $100,000 penalty; and
  • Jefferies: $43,215.22 disgorgement plus prejudgment interest and a $100,000 penalty
Also, the SEC filed a Complaint in the United States District Court for the Southern District of New York against Oppenheimer & Co., Inc. charging the firm with the same violations cited in the Orders above in connection with at least 354 offerings; however, Oppenheimer is further charged with making deceptive statements to issuers in violation of MSRB Rule G-17, which prohibits deceptive, dishonest, or unfair practices.  As alleged in part in the SEC Release:

[T]hese are the first SEC actions addressing underwriters who fail to meet the legal requirements that would exempt them from obtaining disclosures for investors in certain offerings of municipal bonds. 

According to the SEC's complaint and the settled orders, during different periods since 2017, the four firms sold new issue municipal bonds without obtaining required disclosures for investors. Each of the firms purported to rely on an exemption to the typical disclosure requirements called the limited offering exemption, but they did not take the steps necessary to satisfy the exemption's criteria.

. . .

The SEC's complaint against Oppenheimer, filed in federal district court in Manhattan, charges the same violations as above in connection with at least 354 offerings. The complaint also alleges that Oppenheimer made deceptive statements to issuers in violation of MSRB Rule G-17, which prohibits deceptive, dishonest, or unfair practices. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, and a civil money penalty.

As a result of its findings in these investigations, the SEC staff has begun investigations of other firms' reliance on the limited offering exemption. Firms that believe their practices do not comply with the securities laws are encouraged to contact the SEC at   . . .

SEC Brings Settled Actions Charging Cherry-Picking and Compliance and Supervisory Failures (SEC Release)
In response to a Complaint filed in the United States District Court for the District of New Jersey, Scott Adam Brander, Buckman Advisory Group, LLC, and Henry J. Buckman, Jr. settled the charges. As alleged in part in the SEC Release:

The SEC's complaint against Brander, filed in federal district court in New Jersey, alleges that from 2012 through 2017, Brander disproportionately allocated profitable trades to his own account and unprofitable trades to certain client accounts, to enrich himself at the expense of his clients. The complaint further alleges that Brander often traded highly leveraged securities and disproportionately allocated unprofitable trades in these securities to his clients. Brander made these allocations without performing any analysis as to whether these potentially volatile securities were suitable for his clients or discussing the risks with them. According to the complaint, Brander improperly received more than $800,000 of ill-gotten gains as a result of his fraudulent scheme. The complaint charges Brander with violating the antifraud provisions of Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the allegations, Brander consented to the entry of a judgment, subject to court approval, that permanently enjoins him from violating these provisions and orders him to pay disgorgement of $812,876, prejudgment interest of $169,089.83, and a civil penalty of $200,000.

The SEC also instituted a related settled administrative proceeding against Buckman Advisory Group and its CEO Buckman, based on their failures to implement policies and procedures reasonably designed to prevent violations of the Advisers Act and on their failures in supervising Brander. The SEC's order charges Buckman Advisory Group with violating, and Buckman with causing its violations of, Advisers Act Section 206(2); the firm with violating, and Buckman with aiding and abetting and causing its violations of, Advisers Act Section 206(4) and Rule 206(4)-7; and both the firm and Buckman with failure to reasonably supervise Brander within the meaning of Sections 203(e)(6) and 203(f) of the Advisers Act. Without admitting or denying the findings in the SEC order, both Buckman Advisory Group and Buckman agreed to the entry of cease-and-desist orders; the firm agreed to a censure, a penalty of $400,000, and an undertaking to retain and adopt the recommendations of an independent compliance consultant; and Buckman agreed to a penalty of $75,000 and a limitation on acting in a supervisory capacity for twelve months.
Without admitting or denying the findings in an SEC Order, VMware Inc. consented to a cease-and-desist order and agreed to pay an $8 million penalty. The SEC Order found that VMware violated antifraud provisions of the Securities Act as well as certain reporting provisions of the federal securities laws. In part the SEC Release alleges that:

[B]eginning in fiscal year 2019, VMware began delaying the delivery of license keys on some sales orders until just after quarter-end so that it could recognize revenue from the corresponding license sales in the following quarter. According to the SEC's order, VMware shifted tens of millions of dollars in revenue into future quarters, building a buffer in those periods and obscuring the company's financial performance as its business slowed relative to projections in fiscal year 2020. Although VMware publicly disclosed that its backlog was "managed based upon multiple considerations," it did not reveal to investors that it used the backlog to manage the timing of the company's revenue recognition.

Nikhil Wahi pled guilty in the United States District Court for the Southern District of New York to one count of conspiracy to commit wire fraud. As alleged in part in the DOJ Release:

At all relevant times, Coinbase was one of the largest cryptocurrency exchanges in the world.  Coinbase users could acquire, exchange, and sell various crypto assets through online user accounts with Coinbase.  Periodically, Coinbase added new crypto assets to those that could be traded through its exchange, and the market value of crypto assets typically significantly increased after Coinbase announced that it would be listing a particular crypto asset.  Accordingly, Coinbase kept such information strictly confidential and prohibited its employees from sharing that information with others, including by providing a "tip" to any person who might trade based on that information.

Beginning in approximately October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase asset listing team.  In that role, ISHAN WAHI was involved in the highly confidential process of listing crypto assets on Coinbase's exchanges and had detailed and advanced knowledge of which crypto assets Coinbase was planning to list and the timing of public announcements about those crypto asset listings. 

On multiple occasions between July 2021 and May 2022, after getting tips from ISHAN WAHI as to which crypto assets Coinbase was planning to list on its exchanges, NIKHIL WAHI used anonymous Ethereum blockchain wallets to acquire those crypto assets shortly before Coinbase publicly announced that it was listing these crypto assets on its exchanges.  Following Coinbase's public listing announcements, on multiple occasions NIKHIL WAHI sold the crypto assets for a profit. 

To conceal his purchases of crypto assets in advance of Coinbase listing announcements, NIKHIL WAHI used accounts at centralized exchanges held in the names of others, and transferred funds, crypto assets, and proceeds of their scheme through multiple anonymous Ethereum blockchain wallets.  NIKHIL WAHI also regularly created and used new Ethereum blockchain wallets without any prior transaction history in order to further conceal his involvement in the scheme.

Romanian National Sentenced to Prison for Role in International Online Auction Fraud Scheme (DOJ Release)
Costel Alecu, 38, was sentenced in the United States District Court for the Northern District of Ohio
 "to more than five and a half years in prison " and ordered to pay a $12,000 special assessment. As alleged in part in the DOJ Release (which fails to disclose whether the sentences were impose pursuant to a plea agreement or after trial):

[F]rom July 2008 through August 2020, Alecu and codefendant Madalin Ghinea, 35, of Alexandria, Romania, were part of a conspiracy that devised a scheme to entice victims in the United States and elsewhere to purchase items online, including vehicles and other high-value items, that did not exist and to obtain the personal identifying information of their victims. 

As a result, victims suffered a combined loss of approximately $3 million USD. 

As part of the scheme, Alecu and other conspiracy members created accounts on various auction websites to post advertisements for goods that did not exist.  In certain cases, Alecu and others created and used fictitious websites, email addresses and other forms of communication that contained counterfeit trademark information designed to convince their victims that the advertisements were genuine. 

In addition, court documents state that the conspirators used a number of fraudulent online communication templates and email addresses to deceive victims into believing that they were communicating with legitimate business representatives when, in fact, they were speaking with a member of the conspiracy.

Court documents state that Alecu and others in the conspiracy then used a network of money launderers and money mules to obtain payment from their victims and transfer the funds overseas.  Alecu and the conspirators then used the stolen personal identifying information of their victims, credit cards and bank accounts to launder money overseas and fund the operation of their network by purchasing items such as virtual private networks and domain names.

Romanian authorities arrested Alecu and Ghinea in March 2021.

Madalin Ghinea was sentenced on June 1, 2022, to more than four years in prison and ordered to pay $450,000.00 in restitution for his role in the scheme.

FINRA Fines BofA Securities, Inc. $5 Million for Large Options Position Reporting Failures / Firm Failed to Report Over-the-Counter Options Positions in More Than 7.4 Million Instances (FINRA Release)
Pursuant to the identification of OTC exercise limits, FINRA's Trading and Financial Compliance Examination Group originated a matter that was resolved by FINRA imposing upon member firm BofA Securities Inc. a $5 million fine. BofAS consented to the entry of FINRA's findings, without admitting or denying the charges; and the firm agreed to a penalty of a Censure and a certification that BofAS has established, maintains and enforces supervisory procedures reasonably designed to achieve compliance with FINRA Rule 2360. 

Read the full Acceptance, Waiver & Consent settlement ("AWC") at

As alleged in part in the FINRA News Release:

FINRA Rule 2360 requires member firms to report large options positions to the LOPR, which FINRA uses to surveil for potentially manipulative behavior, including attempts to corner the market in the underlying equity, leverage an option position to affect the price, or move the underlying equity to change the value of a large option position. The accuracy of LOPR reporting is essential to FINRA's surveillance, and is particularly important with respect to the OTC options market because there is no independent source of data for regulators to review OTC options activity.

Between January 2009 and October 2020, BofAS failed to report OTC options positions to the LOPR in more than 7.4 million instances, in violation of Rule 2360 as well as Rule 2010 (Standards of Commercial Honor and Principles of Trade). Twenty-six of the unreported positions were also over the applicable OTC position limit of either 25,000 or 50,000 contracts. In addition, FINRA found that from January 2014 through October 2020, the firm's supervisory system was not reasonably designed to comply with its LOPR reporting obligations, a violation of FINRA Rules 3110 (Supervision) and 2010. Among other things, the firm did not have an effective system to detect whether there were positions that should have been reported to the LOPR but were not.

Bill Singer's Comment: I mean, seriously, FINRA thinks that it should take a victory lap when it's citing -- in 2022 -- misconduct that transpired from January 2009 through October 2020? Not only didn't FINRA catch the earliest non-reporting going back just shy of 13 years, but, somehow, the self-regulatory-organization missed 7.4 million instances of failed reporting. Frankly, this AWC offers little more than a pathetic display of lame-ass self-regulation. For a variation on the inept and ineffective self regulation of Wall Street, see: "Stone Cold Day of Reckoning for FINRA and Self Regulation" ( Blog/ September 12, 2022)

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Without admitting or denying the findings in an SEC Order, Hudson Advisors L.P. and Lone Star Global Acquisitions Ltd. agreed to a cease-and-desist order finding that they violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 204(6)-7 and 206(4)-8 thereunder, and ordering them to pay  $11.2 million in civil penalties (Respondents paid an $68.5 million reimbursement). As alleged in part in the SEC Release:

[B]between at least 2005 and 2017, Hudson included $54.6 million of its owner's anticipated U.S. tax liability in fees charged to the funds. By law, these tax liabilities were payable by the owner rather than by Hudson. The SEC's order finds that Hudson and Lone Star Global never disclosed the inclusion of these tax liabilities to their clients. The order also finds that Hudson and Lone Star Global were not authorized to charge this fee component without full and fair disclosure to the funds. Lastly, the order finds that Hudson and Lone Star Global failed to implement appropriate policies and procedures in connection with conflicts of interest and disclosure of fees charged to advisory clients.

Good morning and thank you, Gurbir [Grewal, Director, SEC Division of Enforcement], for that kind introduction.[1] I am pleased to join you for the first SEC Speaks Conference to be conducted in-person since the start of the pandemic.

During the past two-and-a-half years, we have used new methods to communicate and work with each other. Our ability to improvise, adapt, and overcome has allowed our economy to sustain itself during this period. Importantly, robust and efficient capital markets have played a key role in fostering innovation and creativity, which has resulted in new services and products to address the challenges of the pandemic.

While I have attended SEC Speaks in the past, today is the first where I have the privilege of addressing you. With this appearance coming slightly over two months since I was sworn into office as a Commissioner, it is an opportune time to describe the factors and principles that will guide how I will approach upcoming policy decisions.

My views have been shaped by my professional experience. For nearly nine years, I was in private practice drafting securities offering disclosures as well as preparing periodic reports and proxy statements. As a state securities regulator, I witnessed some of the most egregious retail-level frauds and their impact on investors, but I also observed firsthand inspiring stories of entrepreneurs seeking capital. For nearly 16 years at the Commission, I have been involved in rulemaking, ensuring that such efforts complied with the Administrative Procedure Act, including a robust consideration of all public comments and a comprehensive economic analysis.

The SEC's Tripartite Mission is My Foundation

Maintaining a focus on investor protection, capital formation, and fair and orderly markets will promote high quality regulatory standards. Although capital markets have grown increasingly complex, our mission remains the same as it did when the SEC was first created.[2] Ferdinand Pecora, an early architect of the SEC, put the following question to the Convention of the Farmers Union of Iowa while speaking in 1934: "[w]hat are the objectives of the Securities Act of 1933?" His response was: "[t]o see it that those who issue securities and offer them for sale to the public, shall first tell the truth and the whole truth to the public with respect to these securities." This observation remains true today and should guide our regulatory responses through both calm and turbulent markets.

Prioritize Effective and Cost-Efficient Regulations

I analyze regulations using a two-by-two matrix. One axis is labeled whether a regulation is effective or ineffective. The other axis is labeled whether a regulation is costly or not costly. Thus, one can categorize a regulation into one of four boxes.

The Commission - and any regulator - should strive for regulations that are effective and not costly. This box contains regulations that address the identified problem and do so at the lowest possible cost.

The second box contains regulations that are effective, but costly. These regulations may resolve the identified problem, but at a significant cost. The goal of a responsible regulator should be to modify these types of regulations and shift them to the first box. A solid economic analysis can enable a regulator to distinguish between approaches that are effective and efficient, on the one hand, and effective but costly, on the other.

The third box contains regulations that are ineffective but not costly. Given the thousands of pages of SEC rules contained in the Code of Federal Regulations, many of which have not been scrutinized for effectiveness for decades, I fear that a large number may fall within this box.[3] However, as the rules are not particularly costly from a compliance perspective, further reform or removal may not be at the top of the regulatory agenda.

That brings us to the final box - regulations that are ineffective and costly. These rules must be avoided. The ultimate cost of such rules falls not on Wall Street or corporations, but on investors and the public. More importantly, investors and the public will still remain vulnerable to the very concern that such rules were intended to address.

As I evaluate the proposals on the Commission's regulatory agenda, and the various choices presented thereunder, this two-by-two matrix will frame my analysis.

Limited Scope and Regulator Independence

Financial regulators - including the SEC, the Commodity Futures Trading Commission, and the Federal Trade Commission - have a unique place in our constitutional structure. Although part of the Executive Branch, they are not subject to direct control by the President in the same manner as the Department of Justice, the Department of Labor, or the Department of Commerce.

The Commission is structurally designed to promote regulation that is the product of consideration by five individuals with different perspectives. The underlying statute that created the Commission requires that the commissioners come from different political parties, with no more than three being from the same party.[4]

I view this arrangement as creating a basic bargain that the SEC will enjoy a degree of independence and insulation from political accountability to the voters, but in return, will have a narrow scope of responsibilities.

The lack of political accountability, however, can make it tempting to use the federal securities laws to alter or influence general business conduct or to resolve pressing societal concerns, in the absence of financial materiality. Taken to an extreme, "everything everywhere is securities fraud."[5]

I disagree with that view. The Commission best serves the American public when it works within the statutory framework enacted by Congress and the limitations imposed by the courts. The Commission is not well-suited, nor should it attempt to resolve, complex societal questions that do not relate to financial market practices. Those questions are best addressed by the legislature.

Economic Analysis is Important and Should Consider the Effects of Multiple Overlapping Rule Proposals

Final rules should result from careful and thoughtful analysis, including sufficient time for the public to comment on a proposal. The Commission should ensure that rulemakings consider all known economic impacts, including the cumulative impact of concurrent rulemakings. While individual regulations may not be costly, when aggregated they may impose significant compliance costs for firms and individuals.

The Commission staff's guidance on economic analysis sheds light on how to carry out this exercise. That guidance states that an economic analysis compares "the current state of the world, including the problem that the rule is designed to address, to the expected state of the world with the proposed regulation (or regulatory alternatives) in effect."[6] The guidance further states that proposing releases should include "a discussion of any existing studies or data that bear on the proposal so that the public knows what studies or data we are relying on, can comment on it, and can provide additional data relevant to the topic."[7] This is an important component of the rulemaking process, and one that should underpin our decision-making.

Don't Take Steps that Deter Robust Public Comment

Several rulemaking proposals issued by the Commission in 2021 and in early 2022 had a comment deadline of only 30 days after publication in the Federal Register, which I view as insufficient under the circumstances. The 30-day comment period stands in contrast to executive orders issued by the administrations of President Clinton, President Obama, and President Biden, all of which recognized the importance of a 60-day comment period.[8] A comment period of at least 60 days is also endorsed by the Administrative Conference of the United States for significant regulatory actions.[9]

The Commission recently finalized a proposal that had a short 30-day comment period.[10] In that case, the Commission proposed amendments on November 18, 2021 and comments were due by December 27 of that year.[11] This period overlapped with major holidays. It also fell during the first holiday season since the rollout of COVID vaccines, which allowed families to gather for the first time since the start of the pandemic.

The short comment period likely deterred some interested persons from submitting comment letters. It may have also resulted in the Commission seeing a narrower picture of the public concerns and failing to capture relevant data and perspectives. Short comment periods are also inappropriate when the Commission is asking for public comment on multiple proposals affecting the same stakeholders at the same time or in short order.

Don't Take Rulemaking Shortcuts

As a rulemaking convention, staff practice has been generally to recommend re-proposal if more than five years have elapsed since the original proposal. Yet, the Commission has instead recently decided to simply reopen the comment period for several proposals that were past the five-year expiration date.[12]

These reopening notices went even further and introduced new regulatory alternatives. The reopening notices, however, did not provide any accompanying economic analysis or examine the effects that such alternatives may have on smaller entities. In other words, the Commission used procedural shortcuts that undercut the robust notice-and-comment process required by the Administrative Procedure Act.[13]

One example was the proposal to implement the Dodd-Frank Act's pay versus performance requirement, initially issued on April 29, 2015.[14] On January 27, 2022, the Commission reopened the comment period on the proposed rule.[15] The reopening notice did not update any economic analysis, benefits and costs discussion, or analysis required by the Paperwork Reduction Act[16] and the Regulatory Flexibility Act.[17]

The failure to update the economic analysis from the 2015 proposal was problematic because significant parts of the data justifying the original proposal were from 2010 and 2012, while other data was from the period between 1997-2008.[18] Yet, the adopting release contained an economic analysis using data from 2020 - one that the public had never seen, or been given the chance to comment on.[19]

Avoid Issuing New Interpretations through Enforcement Actions

Rulemaking can be challenging and time-consuming. It may be tempting to develop "new" interpretations of existing statutes and rules and apply them through enforcement action. This temptation should be avoided.

One significant shortcoming of regulation by enforcement is that it fails to provide a mechanism for the Commission to consider the views by market participants, which can result in a myopic approach. In contrast, through the rulemaking process, the public can provide their perspectives on market practices and developments, leading to an informed regulatory response. Regulation through litigation fails to provide these important inputs that result in better crafted rules.

Additionally, regulation by enforcement fails to provide the nuanced and comprehensive guidance that allows market participants to tailor their practices, and instead requires regulated entities to divine how the facts and circumstances of another case apply to their own business model. Market participants should be able to look to the Commission's rules rather than compare how their particular facts and circumstances may differ from those in a specific enforcement case. This principle, while often requiring a longer timeline, and more deliberation, often results in a more transparent and understandable regulatory framework.

Be Willing to Tackle the Big, Difficult, and Complex Issues

Today, one big, difficult, and complex issue that is conspicuously absent from the Commission's published regulatory agenda is how to regulate crypto assets and related services. Market participants have expressed significant concerns regarding the lack of regulatory guidance in this space. There is a widespread concern that the lack of predictability with regard to our regulation may encourage crypto firms to relocate to other jurisdictions.

There are two major issues and areas of uncertainty: does the crypto asset constitute a security and, if so, how do market participants comply with the federal securities laws and the Commission's rules. To date, the Commission's views in this space have been more often expressed through enforcement action. This is an example of a situation where regulation through enforcement does not yield the outcomes achievable through a process that involves public comment.

Without the benefit of comments from crypto investors and other market participants, the Commission is unable to consider their perspectives in developing an appropriate regulatory framework. To the extent that crypto assets raise unique issues not otherwise addressed in the current rule book, the Commission should consider proposing rules or issuing interpretive releases.

* * * * *

Thank you for listening to my thoughts this morning, even if you will not be receiving CLE credit for it! I want to acknowledge the many hard-working members of the SEC staff who have contributed to the presentations and materials for this conference. It has been a privilege and an honor to call them colleagues and friends. I have seen firsthand their dedication to serve the public by creating robust, dynamic, and resilient markets that work for all Americans.

[1] The views I express today are my own and do not necessarily reflect those of the Commission or my fellow Commissioners.

[2] See, e.g., Act of June 6, 1934, Public Law No. 73-291, 48 STAT 881 ("to provide for the regulation of securities exchanges and of over-the-counter markets operating in interstate and foreign commerce and through the mails, to prevent inequitable and unfair practices on such exchanges and markets, and for other purposes.")

[3] The 2021 version of Title 17 of the Code of Federal Regulations for Commission rules covers 922 pages in volume3, 798 pages in volume 4, and 574 pages in volume 5. See

[4] 15 U.S. Code § 78d.

[5] Matt Levine, Bloomberg News, Everything Everywhere Is Securities Fraud (June, 26, 2019) (discussing views of U.S. federal securities laws that treat any negative event affecting a U.S. public company as securities fraud) available at

[6] Memorandum from the Division of Risk, Strategy, and Financial Innovation and the Office of the General Counsel, Current Guidance on Economic Analysis in SEC Rulemakings (Mar. 16, 2012), at 21, available at

[7] Id. at 16.

[8] Executive Order 13563, Improving Regulation and Regulatory Review (Jan. 18, 2011) [76 Fed. Reg. 3821 (Jan. 21, 2011)]; see also Executive Order 12866, Regulatory Planning and Review (Sept. 30, 1993) [58 Fed. Reg. 51735 (Oct. 4, 1993)] ("each agency should afford the public a meaningful opportunity to comment on any proposed regulation, which in most cases should include a comment period of not less than 60 days"); Memorandum for the Heads of Executive Departments and Agencies, Modernizing Regulatory Review (Jan. 20, 2021) [86 Fed. Reg. 7223 (Jan. 26, 2021)] ("This memorandum reaffirms the basic principles set forth in [Executive Order 12866] and in Executive Order 13563 of January 18, 2011 (Improving Regulation and Regulatory Review), which took important steps towards modernizing the regulatory review process. When carried out properly, that process can help to advance regulatory policies that improve the lives of the American people.").

[9] See Administrative Conference of the United States, Rulemaking Comments, Recommendation No. 2011-2 (June 16, 2011), available at

[10] Mark T. Uyeda, Statement on Final Rule Amendments on Proxy Voting Advice (July 13, 2022), available at

[11] See Proxy Voting Advice, Release No. 34-93595 (Nov. 17, 2021) [86 FR 67383 (Nov. 26, 2021)].

[12] See Reopening of Comment Period for Pay Versus Performance, Release No. 34-94074 (Jan. 27, 2022) [87 FR 5751 (Feb. 2, 2022)], available at; Reopening of Comment Period for Listing Standards for Recovery of Erroneously Awarded Compensation, Release No. 33-10998 (Oct. 14, 2021) [86 FR 58232 (Oct. 21, 2021)], available at; Reopening of Comment Period for Universal Proxy, Release No. 34-91603 (Apr. 16, 2021) [86 FR 24364 (May 6, 2021)] available at (collectively, "reopening notices").

[13] Id.

[14] Pay Versus Performance, Release No. 34-74835 (Apr. 29, 2015) [80 FR 26329 (May 7, 2015)] ("2015 Proposal"), available at

[15] Reopening of Comment Period for Pay Versus Performance, Release No. 34-94074 (Jan. 27, 2022) [87 FR 5751 (Feb. 2, 2022)] available at

[16] 44 U.S.C. 3501 et seq.

[17] 5 U.S.C. 603(a).

[18] 2015 Proposal at n. 132 (the 2015 Proposal acknowledges the data may not reflect practices at the time the 2015 Proposal was published).

[19] Pay Versus Performance, Release No. 34-95607 (Aug. 25, 2022) [87 FR 55134 (Sept. 8, 2022)], available at

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95712; Whistleblower Award Proc. File No. 2022-82)
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant, which Claimant timely appealed. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

[F]irst, the record demonstrates that the Investigation was opened in Redacted more than two years before Claimant began providing his/her information to the Commission. Accordingly, Claimant's information did not cause the staff to open the Investigation. 

Second, even assuming that Claimant's information caused the Commission to inquire into conduct in Other Country, the Commission did not bring a successful action in whole or in part based on conduct that was the subject of Claimant's information, nor did Claimant's information significantly contribute to the Investigation. It is undisputed that the information Claimant provided to the Commission did not address conduct in Country, but instead related to conduct in Other Country. And while the record shows that Enforcement staff investigated conduct in Other Country, the violations charged in the Covered Action only pertain to conduct in Country. Enforcement staff confirmed that Claimant's information was not used in nor had any impact on the charges brought in the Covered Action. 

Further, Claimant's information did not assist with settlement discussions or otherwise help resolve the Covered Action. Enforcement staff assigned to the Investigation have confirmed, in a supplemental declaration, which we credit, that Enforcement staff had already determined, prior to the beginning of settlement discussions, that there was not sufficient evidence for the Commission to bring charges based upon conduct in Other Country. 

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95712; Whistleblower Award Proc. File No. 2022-81)
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant, which Claimant timely appealed. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

[F]irst, the record demonstrates that the Commission's investigation which led to the Covered Redacted Action (the "Investigation") was opened Redacted in more than eighteen months before Claimant submitted his/her tip to the Commission, and more than one year before Claimant contends Claimant spoke with the investigator associated with the Law Firm. Accordingly, Claimant's information did not cause the staff to open the Investigation. 

Second, the record shows that Claimant's tip to the Commission did not cause the staff to inquire into different conduct or significantly contribute to the Investigation. To the extent that Claimant argues he/she is the original source of any information provided to the Commission by the Law Firm, Enforcement staff provided a supplemental declaration, which we credit, stating that the staff did not recall receiving any communications or tips from the Law Firm or the investigator with regard to the Company or the Investigation. The staff also reviewed email records associated with the Investigation and did not identify any email or tip from the Law Firm or the investigator. For these reasons, the record does not support the contention that Claimant was the original source of any information used by the Commission prior to the filing of the Covered Action. Lastly, as stated by the CRS, Claimant's own submission to the Commission occurred approximately six weeks after the Covered Action was filed and therefore did not contribute to the Investigation or to the charges in or resolution of the Covered Action.

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95712; Whistleblower Award Proc. File No. 2022-80)
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant, which Claimant timely appealed. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

Second, the record shows that Claimant's information did not cause the staff to inquire into different conduct or significantly contribute to the Investigation. Enforcement staff assigned to the Investigation confirmed that Claimant's information, which concerned the issue of Redacted did not relate to the matters at issue in the Investigation or the charges in the Covered Action. Further, staff confirmed that the Redacted Claimant raised in the Response were already known to the staff before Redacted Claimant submitted his/her information. Staff assigned to the Investigation also confirmed that the Commission's NYRO staff did not share any additional information received from Claimant. The emails Claimant attached to the Response also do not bolster his/her argument: the staff had Redacted already confirmed that Claimant's information from Redacted did not relate to the Investigation or the charges in the Covered Action. Based upon these facts, Claimant's information did not cause the staff to inquire into different conduct or significantly contribute to the Investigation.

Claimant does not qualify for an award under either of the above-described provisions. First, the record demonstrates that the Commission's investigation which led to the Covered Action (the "Investigation") was opened based upon information developed during a separate investigation into the Company. Claimant's information did not cause the staff to open the Investigation. 

SEC Denies Whistleblower Award to Claimant Citing Untimely Filing
Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95711; Whistleblower Award Proc. File No. 2022-79)
The SEC's Claims Review Staff ("CRS") issued Preliminary Determinations recommending the denial of a Whistleblower Award to Claimant, which Claimant timely appealed. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

Claimant argues that the Commission should use its authority under Exchange Act Rule 21F-8(a) to waive the ninety-day filing requirement in the two Covered Actions discussed herein. Rule 21F-8(a) provides that "the Commission may, in its sole discretion, waive any of these procedures upon a showing of extraordinary circumstances." We have explained that the "extraordinary circumstances" exception is "narrowly construed" and requires an untimely claimant to show that "the reason for the failure to timely file was beyond the claimant's control." Further, we have identified "attorney misconduct or serious illness" that prevented a timely filing as two examples of the "demanding showing" that an applicant must make before we will consider exercising our discretionary authority to excuse an untimely filing. 

SEC Denies Whistleblower Award to Claimant Citing "Potential or Theoretical Use"
Order Determining Whistleblower Award Claims ('34 Act Release No. 34-95672; Whistleblower Award Proc. File No. 2022-78)
The SEC's Office of the Whistleblower ("OWB") issued a Preliminary Summary Disposition recommending the denial of a Whistleblower Award to Claimant, which Claimant timely appealed. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that [Ed: footnote omitted]:

[F]irst, Claimant misinterprets the eligibility criteria under Rule 21F-4(c)(1): contrary to Claimant's arguments in the Response, our rules do not provide for awards based upon the potential or theoretical use of a claimant's information. Instead, awards are based upon the actual use of a claimant's information by Commission staff. As we have stated, "the standard for award eligibility is not what the staff would have, or could have done in hypothetical circumstances but, rather, what impact the whistleblower's information actually had on the investigation." The Commission will not speculate on the supposed value of Claimant's information in the absence of its actual use during the Investigation. 

Accordingly, while Claimant may have submitted information to the Commission prior to the opening of the Investigation, the record here demonstrates that Claimant's information did not cause Enforcement staff responsible for the Investigation to open the Investigation or cause the staff to inquire into different conduct. A staff declaration, which we credit, confirms that the staff responsible for the Investigation opened the Investigation based upon a referral from REDACTED ("Other Agency 1"). A supplemental declaration from OWB staff, which we also credit, confirms that, after review of Claimant's information, other Enforcement staff referred Claimant's information to the REDACTED ("Other Agency 2") and the REDACTED ("Other Agency 3") and then closed Claimant's submission with a disposition of "no further action." Contrary to Claimant's contentions, there is no evidence in the record that Other Agency 2 or Other Agency 3 had any role in the referral to the Commission from Other Agency 1, and the record demonstrates that Other Agency 1 has no record of receiving any information from Claimant or that Claimant was the source of Other Agency 1's referral to the Commission. And while other Enforcement staff reviewed Claimant's tip and forwarded it to Other Agency 2 and Other Agency 3, there is no evidence in the record that Claimant's information was forwarded to staff assigned to the Investigation.

The record demonstrates that Claimant did not cause the Commission to inquire into different conduct and did not significantly contribute to the success of the action: Claimant's information was not used by staff assigned to the investigation, nor did Claimant ever communicate with staff assigned to the investigation.
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, SagePoint Financial, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that SagePoint Financial, Inc. has been a FINRA Member Firm since 2005 with about 1,800 registered representatives at 800 branches. In accordance with the terms of the AWC, FINRA imposed upon SagePoint Financial a Censure, $35,000 fine and $51,830.25 in restitution.As alleged in under the "Overview" section of the AWC [Ed: footnote omitted]:

During the period April 2014 through July 2017, SagePoint failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as they pertain to margin use. As a result, SagePoint failed to identify or reasonably respond to red flags of unsuitable use of margin in two customer accounts that caused the customers to pay more than $51,800 in commissions, fees, and margin interest. By this conduct, SagePoint violated NASD Rule 3010, FINRA Rules 3110 and FINRA Rule 2010.
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, Glendale Securities, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Glendale Securities, Inc. has been a FINRA Member Firm since 2003 with about 12 registered representatives at three branches. In part under the "Background" section of the AWC, FINRA alleges that [Ed: footnote omitted]:

In 2010, Glendale consented to FINRA's findings that, between 2005 and 2008, the firm failed to adequately implement its anti-money laundering (AML) compliance program insofar as the firm failed to detect, analyze, and/or report suspicious transactions. AWC Nos. 2009019747601 and 20060075263 (Nov. 2010). The firm also failed, between 2007 and 2009, to establish and maintain an adequate supervisory system and written procedures that were reasonably designed to prevent participation in an unregistered distribution of securities. As a result, the firm allowed a customer to deposit millions of shares of low-priced securities into more than 50 foreign corporate accounts, promptly liquidate them, and wire the proceeds to multiple foreign bank accounts. Additionally, the firm consented to the imposition of a censure and a $45,000 fine for violating NASD Rules 3011, 3010, and 2110, as well as FINRA Rule 2010.

In 2021, the National Adjudicatory Counsel (NAC) held that the firm violated FINRA Rules 3310 and 2010 by failing to: (a) establish and implement an AML compliance program reasonably tailored to its microcap stock liquidation business; (b) detect, investigate, and report red flags presented in 2015 and 2016 by suspicious liquidations of three penny stocks; ( c) conduct adequate due diligence on accounts introduced to the firm by a bank in Belize; and ( d) employ non-documentary means, in accordance with the firm's Customer Identification Program, to verify the identities of customers based in China, Malaysia, and Singapore. Dep 't of Enforcement v. Glendale Securities, Inc., et al., No. 2016049565901, 2021 FINRA Discip. LEXIS 25 (NAC Oct. 6, 2021 ). In addition, the NAC held that the firm violated FINRA Rules 3110 and 2010 by failing to supervise communications between Asia-based customers and one of its registered representatives. The NAC sanctioned the firm with a censure, a $155,000 fine, and a requirement to retain a consultant to review and revise its AML-related procedures to appropriately tailor them to its microcap stock liquidation business model. 

In accordance with the terms of the AWC, FINRA imposed upon Glendale Securities, Inc. a Censure, $50,000 fine, and an undertaking to retain an independent consultant. As alleged in part in the "Overview" section of the AWC:

Between June 2018 and April 2019, Glendale failed to develop and implement an AML compliance program reasonably designed to detect and report suspicious transactions. As a result, the firm failed to investigate red flags of potentially suspicious trading activity in the account of one of its corporate customers. Through this conduct, the firm violated FINRA Rules 3310(a) and 2010.  

Also READ: "Troubling FINRA Regulatory Case: Quis Custodiet Ipsos Custodes?" ( Blog /  October 7, 2021)

Today's Blog presents a difficult scenario. Publisher Bill Singer offers rare and high praise for the efforts of a FINRA Office of Hearing Officers Hearing Panel and of the National Adjudicatory Council. The byproduct of those bodies' deliberations yielded two comprehensive Decisions of the highest caliber. Unfortunately, FINRA's Chief Hearing Officer stayed the proceedings after information had purportedly come to her attention and eventually compelled the hiring of outside counsel to conduct a review. Sadly, FINRA's lack of transparency about the underlying nature of the troubling information mars the proceedings. Quis custodiet ipsos custodes?
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, MM Global Securities, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that MM Global Securities, Inc. has been a FINRA Member Firm since 1940 with about 3 registered representatives. In accordance with the terms of the AWC, FINRA imposed upon MM Global Securities, Inc. a Censure, $450,000 fine and the firm is prohibited from:

1. Providing market access, as defined by SEC Exchange Act Rule 15c3-5(a)(1), to customers for a period of two years following the date of the notice of acceptance of this AWC and; 

2. Engaging in any business in which Respondent provides market access to customers unless and until: 
A registered principal or officer of Respondent certifies in writing to FINRA that the firm revised and enhanced its AML and supervisory procedures related to detecting and investigating suspicious trading activity and potential market manipulation. . . .

As alleged in part in the "Overview" section of the AWC:

From at least January 2019 to June 2020, MM Global failed to establish and implement an anti-money laundering (AML) compliance program reasonably designed to detect and cause the reporting of suspicious activity in violation of FINRA Rules 3310(a) and 2010. During the same period, MM Global failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with federal securities laws and FINRA rules prohibiting market manipulation in violation of FINRA Rules 3110 and 2010. 

From at least October 2017 to April 2019, MM Global also failed to implement its Customer Identification Program (CIP) in violation of FINRA Rules 3310(b) and 2010. 

In addition, from November 2018 to August 2019, MM Global failed to preserve and maintain certain instant messages and email communications of its registered representatives in violation of Section 17(a) of the Securities Exchange Act of 1934, Exchange Act Rule 17a-4(b)(4), and FINRA Rules 4511 and 2010.
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, Ronald Coy Bailey submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Ronald Coy Bailey entered the industry in 2013, and by March 2014, he was registered with NYLife Securities LLCC. In accordance with the terms of the AWC, FINRA imposed upon Bailey a $15,000 fine and a 12-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

In 2017, while associated with NYLife, Respondent participated in a private securities transaction by soliciting and facilitating a firm client's $588,000 investment in an LLC membership interest in Golden Empire Seafood, LLC (Golden Empire) in exchange for compensation from Golden Harvest Alaska Seafood, LLC (Golden Harvest), an affiliate of Golden Empire. Respondent neither notified nor received prior written approval for this securities transaction from NYLife. As a result of this conduct, Respondent violated FINRA Rules 3280 and 2010. 

In 2017 and 2018, Respondent engaged in two outside business activities without providing prior written notice or receiving prior approval from NYLife. Respondent assisted in founding and then served as a strategic partner of Focus Employer Solutions, a human resources and payroll consulting business. Respondent also assisted Golden Harvest establish local business contacts. Respondent did not have NYLife's approval to engage in any of these outside business activities. As a result, Respondent violated FINRA Rules 3270 and 2010. 

Additionally, in the course of soliciting investors to invest in Golden Empire, Respondent emailed financial projections to a potential investor that did not clearly disclose the applicable risks of the investment and were promissory and misleading. As a result, Respondent violated FINRA Rules 2210(d)(l)(A), 2210(d)(l)(B), and 2010.