Securities Industry Commentator by Bill Singer Esq

March 20, 2023

FINRA Suspends Rep For Inaccurate Customer Contact Notes
In the Matter of Derek John Rehill, Respondent (FINRA AWC)
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March 20, 2023, Letter to Jerome Powell, Chair, Board of Governors of the Federal Reserve System
Patrick McHenry, Chairman, House Committee on Financial Services
Tim Scott, Ranking Member, Senate Committee on Banking,Housing, and Urban Affairs
In pertinent part, the Letter
The recent failures of Silicon Valley Bank (“SVB”) and Signature Bank have brought into question the diligence of the individuals and entities charged with overseeing financial institutions and the broader U.S. financial system. Our oversight responsibilities to the American people require that we evaluate the root causes of these bank failures as well as the failures of U.S. regulatory agencies to prevent these collapses from occurring. These responsibilities include obtaining full information about what appears to be glaring bank mismanagement, fundamental lack of prudence in bank risk and balance sheet management, and regulators’ lack of basic supervision and enforcement of safety and soundness rules, regulations, and principles. As the Committees of jurisdiction over the Federal Reserve System (“Federal Reserve”), we ask that you provide the following information no later than March 31, 2023:

1. A comprehensive timeline of events related to the Federal Reserve’s lending, supervisory, and examination activity for the last two years with regards to SVB and/or Signature Bank, as well as a comprehensive timeline of events supporting the recommendation to invoke the Systemic Risk Exception for these two banks; and

2. The names and titles of all officials or employees of the Federal Reserve (including, but not limited to, the Federal Reserve Board of Governors and the Federal Reserve Banks of San Francisco and New York) involved in any capacity with supervising, examining, or lending to SVB and/or Signature Bank and/or the recommendation to invoke the Systemic Risk Exception for these two banks.
Furthermore, this letter serves as a formal request to preserve all existing and future records and materials in your possession relating to the topics addressed in this letter. . . . 

Last individual admits role in nationwide fraud scheme targeting elderly victims (DOJ Release)
In the United States District Court for the Southern District of Texas, Anirudha Kalkote, 25, pled guilty to conspiracy to commit mail fraud. Previously, MD Azad, 26, Sumit Kumar Singh, 25, Himanshu Kumar, 25, and MD Hasib, 27 , pled guilty and are awaiting sentencing.. As alleged in part in the DOJ Release:

Anirudha Kalkote admitted he participated in a fraud ring from 2019-2020 which operated out of various cities including Houston. The scheme targeted elderly victims throughout the United States and elsewhere.

The ring tricked and deceived victims using various ruses and instructed them to send money via wire through a money transmitter business such as Western Union or MoneyGram, by buying gift cards and providing to the fraudsters or by mailing cash to alias names via FedEx or UPS.

Part of the scheme involved fraudsters contacting victims by phone or via internet sites for computer technical support and directing victims to a particular phone number. Once victims contacted the fraudsters, they were told various stories such as they were communicating with an expert that needed remote access to their computer in order to provide technical support services. The fraudsters then gained access to victims’ personal data and bank and credit card information.

Victims typically paid a fee to conspirators for the fake technical support but were later told they were due a refund. Through paying for “technical support” or through the “refund” process, the ring gained access to the victim’s bank account(s) and credit cards and manipulated the accounts to make it appear the victim was paid too large a refund due to a typographical error. Victims were then instructed to reimburse the ring by various means.

Victims were sometimes re-victimized multiple times and threatened with bodily harm if they did not pay.

FINRA Suspends Rep For Inaccurate Customer Contact Notes
In the Matter of Derek John Rehill , Respondent (FINRA AWC 2020066887202)
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, Derek John Rehill submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Derek John Rehill  was first registered in 1998 with Joseph Stone Capital L.L.C.. In accordance with the terms of the AWC, FINRA imposed upon Derek John Rehill  a two-month suspension from associating with any FINRA member in all capacities; because he submitted a statement of financial condition and demonstrated an
inability to pay, no fine was imposed. As alleged in part in the AWC:

During the relevant period, Rehill was responsible for periodically calling customers whose accounts Joseph Stone had identified as “actively traded” to confirm, among other things, the investment objective and risk tolerance reflected on the customer’s new account form. For each call, Rehill was required to complete a customer contact form which included fields for Rehill to record whether the customer had confirmed his or her investment objective and risk tolerance.

On four occasions during the relevant period, Rehill completed customer contact forms that inaccurately stated that customers had confirmed their investment objectives and risk tolerances. On three of the four occasions, Rehill completed customer contact forms reflecting that customers had confirmed they had a speculative investment objective when, in fact, the customers had not. For example, one such customer told Rehill that he wanted to “do more of a long-term thing than keep buying and selling so much.” On the fourth occasion, Rehill completed a customer contact form reflecting that a customer had confirmed he had a speculative risk tolerance when Rehill had not asked the customer any questions about his risk tolerance.

Therefore, Rehill violated FINRA Rule 2010.