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Archive for the ‘Uncategorized’ Category


FINRA receives SEC approval to streamline proficiency exams

The U.S. Securities and Exchange Commission has approved a proposal from the Financial Industry Regulatory Authority (FINRA) to streamline the process for prospective broker-dealer reps to meet their proficiency requirements, FINRA announced Thursday.

The proposal aims to reform the industry exam process, with an eye on expanding opportunities for brokers to enter, or return to, the securities industry. The new regime will take effect starting Oct. 1, 2018.

Under the new structure, aspiring brokers will be required to pass a general knowledge exam, and a revised rep-level qualification exam, such as the Series 7 exam, which is specific to their job functions, FINRA says its announcement.

“The restructured program eliminates duplicative testing of general securities knowledge on representative-level examinations and eliminates several representative-level registration categories that have become outdated or have limited utility,” the announcement says.

“This is an important change built upon the need to streamline the examination process and eliminate redundancies in qualification and registration requirements,” says Robert Cook, FINRA president and CEO, in a statement. “The new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry.”

 

Former broker charged for real estate scheme

The Securities and Exchange Commission today charged a former broker, his company, and his business partner in an alleged real estate investment scheme utilizing high-pressure sales tactics to pilfer $6 million from retirees and other investors while using the proceeds to fund the broker’s lavish lifestyle and start e-cigarette businesses.

The SEC alleges that Leonard Vincent Lombardo, who once worked at Stratton Oakmont and has long since been barred from the brokerage industry by the Financial Industry Regulatory Authority for multiple violations, operated the scheme from behind the scenes at his Long Island-based company The Leonard Vincent Group (TLVG) with assistance from its CFO Brian Hudlin.

According to the SEC’s complaint, more than 100 investors were defrauded with false claims that their money would be invested in distressed real estate, and some were told their investments had increased by more than 50 percent in a matter of months when in fact there were no actual earnings on their investments.  Lombardo allegedly invested only a small fraction of investor money in real estate and used the bulk of it for separate business ventures into the cigarette industry and personal expenses such as car payments on his BMW and Mercedes, marina fees on his boat, and visits to tanning salons.

“As alleged in our complaint, retirees entrusted their money to TVLG believing they were investing in high-return real estate investments, not electronic cigarettes or trips to the tanning salon,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “This is another case involving a fraudster trying to look the part of a wealthy financial advisor while doing nothing more than trying to separate people from their hard-earned money.”

The SEC received complaints from investors about how their investments were being handled, and the agency identified the perpetrators and gathered evidence to hold them accountable.  The SEC encourages investors to alert the agency by filing complaints when they suspect illegal conduct, and proactively check the background of anyone selling them investments before handing over any money, including by doing a simple search on the SEC’s investor.gov website.

Aidikoff, Uhl & Bakhtiari partner Ryan Bakhtiari to speak at 2017 Practicing Law Institute Securities Arbitration program

Aidikoff, Uhl & Bakhtiari partner Ryan Bakhtiari has been invited to participate as a speaker at the 2017 Practicing Law Institute (PLI) conference program on Wednesday, September 27, 2017. Mr. Bakhtiari’s panel is titled “Preparation for Expungement Hearings in Securities Arbitration.”  This discussion will include topics, issues and procedures involved in arbitrating expungement matters.

For more information and to register for the conference, visit http://www.pli.edu/re.aspx?pk=186672&t=LBA7_FCLTY

SEC Charges Businesswoman with Operating a Fraudulent Promissory Note Scheme

The Securities and Exchange Commission today announced fraud charges against a Niles, Illinois businesswoman accused of misappropriating investor funds.

The SEC’s complaint, filed in federal court in the Northern District of Illinois, alleges that Lucita A. Zamoras solicited investors for a promissory note program and subsequently misappropriated the investors’ funds. From at least October 2009 through December 2013, Zamoras engaged in a fraudulent scheme in which she raised approximately $727,049 from at least six investors by encouraging them to transfer their retirement accounts to self-directed individual retirement accounts and purchase promissory notes issued by her. Zamoras, originally from the Philippines, preyed on other Filipino investors by convincing the investors to purchase the notes, which offered them 3.5% to 5% annual interest. The SEC complaint alleges that Zamoras never invested her clients’ funds; instead she used the money to support her gambling habit and pay other personal expenses.

The SEC’s complaint charges Zamoras with violating Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder. The complaint seeks injunctive relief, disgorgement, prejudgment interest and a civil penalty against the Zamoras.

The SEC’s investigation was conducted by Paul Feindt and Scott Frost. The SEC’s litigation will be led by Daniel Wadley and Amy Oliver.

SEC Obtains TRO and Asset Freeze in Investment Scheme Involving Seniors

The Securities and Exchange Commission today announced an emergency asset freeze and temporary restraining order against a Chicago-based investment adviser and his financial management company accused of scamming elderly investors out of millions of dollars.

The SEC alleges that Daniel H. Glick and his unregistered investment advisory firm Financial Management Strategies (FMS) provided clients with false account statements to hide Glick’s use of client funds to pay personal and business expenses, purchase a Mercedes-Benz, and pay off loans and debts among other misuses.

According to the SEC’s complaint, Glick was barred by FINRA in 2014 and had his Certified Financial Planner designation and Certified Public Accountant license revoked for conduct unrelated to today’s SEC charges.

The SEC’s complaint also names Glick Accounting Services, Glick’s business partner David B. Slagter, and Glick’s business acquaintance Edward H. Forte as relief defendants for the purposes of recovering client funds that Glick transferred or paid them in the form of advances or loans.

The complaint alleges that Glick and FMS violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

The court issued a temporary restraining order against Glick and FMS at the SEC’s request, and issued an order freezing the assets of Glick, FMS, and Glick Accounting Services.

Aidikoff, Uhl & Bakhtiari partner Philip Aidikoff to speak at 2016 PIABA program

Aidikoff, Uhl & Bakhtiari partner Philip M. Aidikoff has been invited to participate as a speaker at the 2016 Public Investors Arbitration Associate Bar Association (PIABA) conference program on Thursday, October 27, 2016 and Friday, October 28, 2016. Mr. Aidikoff’s panel is entitled “Hearing Strategy as Seen by Respondent Counsel”.  This panel will include leading Respondent Counsel Sean Coughlin, David Markun and Tracy Gerber and will discuss preparation and presentation issues as well as how to conduct an effective arbitration.

For more information and to register for the conference, visit https://piaba.org/.

Aidikoff, Uhl & Bakhtiari partner Ryan Bakhtiari to speak at 2016 PLI Securities Arbitration program

Aidikoff, Uhl & Bakhtiari partner Ryan Bakhtiari has been invited to participate as a speaker at the 2016 Practicing Law Institute (PLI) conference program on Wednesday, September 28, 2016.

The PLI Securities Arbitration program is held at the PLI New York Center and also online by webcast.  The program brings together legal professionals with securities industry regulators to discuss hot topics in the securities arbitration practice area.  This year’s conference features sessions geared toward attorneys, including:  FINRA Update on the Dispute Resolution Task Force Recommendations; the Arbitrator’s Perspective; Employment Disputes; Ethics; Expert Witnesses and Closing Arguments; and other Hot Topics and Future Trends.

For more information and to register for the conference, visit http://www.pli.edu/re.aspx?pk=149779&t=WKE6_FCLTY

Market Drop Eliminates More than $2 Trillion from Investor Portfolios

The stock market rout is starting to get really expensive — destroying $2.3 trillion from the market’s top last year and $1.5 trillion in net wealth just this year.

The giant companies that predominantly populate the Standard & Poor’s 500 have fallen an average of 8.9% this year — which, when translated into dollars, is real money. The S&P 500 is down 8% this year already — including another 2.2% Friday — in what’s been the worst start to a year ever. Since the market peak on May 21, 2015, the market has declined 11.7%.

The U.K.’s referendum to leave the European Union was a costly decision in more ways than one.

Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. For context, that figure eclipsed the whipsaw trading sessions of the 2008 financial crisis, according to S&P.  The prior one day sell-off record was $1.9 trillion back in September of 2008.  According to S&P’s Broad Market Index, combined market capitalization is currently worth nearly $42 trillion.

Massive demand for safe-haven assets is outstripping supply, he added, meaning currencies like the yen and U.S. dollar, as well as government bonds and gold, are likely to keep booming.

SEC Completes Muni-Underwriter Enforcement Sweep

The Securities and Exchange Commission today announced enforcement actions against 14 municipal underwriting firms for violations in municipal bond offerings.  The actions conclude charges against underwriters under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.  In all, 72 underwriters have been charged under the voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.

The MCDC Initiative, announced in March 2014, offered favorable settlement terms to municipal bond underwriters and issuers that self-reported violations.  The first enforcement actions against underwriters under the initiative were brought in June 2015 against 36 municipal underwriting firms.  An additional 22 underwriting firms were charged in September 2015.  All of the firms settled the actions and paid civil penalties up to a maximum of $500,000.

The initiative is continuing with respect to issuers who may have provided investors with inaccurate information about their compliance with continuing disclosure obligations.  The SEC’s2012 Municipal Market Report identified issuers’ failure to comply with their continuing disclosure obligations as a major challenge for investors seeking important information about their municipal bond holdings.

“The settlements obtained under the MCDC initiative have brought much-needed attention to disclosure obligations in municipal bond offerings,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division.  “As part of the settlements, 72 underwriting firms – comprising approximately 96% of the market share for municipal underwritings – have agreed to improve their due diligence procedures and we expect that investors will benefit from those improvements.”

In today’s actions, the SEC found that between 2011 and 2014, the 14 underwriting firms sold municipal bonds using offering documents that contained materially false statements or omissions about the bond issuers’ compliance with continuing disclosure obligations. The SEC also found that the underwriting firms failed to conduct adequate due diligence to identify the misstatements and omissions before offering and selling the bonds to their customers.

The 14 firms, which did not admit or deny the findings, agreed to cease and desist from such violations in the future.  Under the terms of the MCDC Initiative, they will pay civil penalties based on the number and size of the fraudulent offerings identified, up to a cap based on the size of the firm.  In addition, each firm agreed to retain an independent consultant to review its policies and procedures on due diligence for municipal securities underwriting.

The MCDC Initiative is being coordinated by Kevin Guerrero of the Enforcement Division’s Municipal Securities and Public Pensions Unit.  The cases announced today were investigated by members of the unit, including Michael Adler, Robert Barry, Joseph Chimienti, Kevin Currid, Peter Diskin, Robbie Mayer, Heidi Mitza, William Salzmann, Ivonia K. Slade, Jonathan Wilcox, Monique C. Winkler, and Deputy Unit Chief Mark R. Zehner, with assistance from Ellen Moynihan of the Boston Regional Office.

Barclays, Credit Suisse Charged With Dark Pool Violations

The New York Attorney General’s office is announcing parallel actions against the two firms.

Barclays agreed to settle the charges by admitting wrongdoing and paying $35 million penalties to the SEC and the NYAG for a total of $70 million.

Credit Suisse agreed to settle the charges by paying a $30 million penalty to the SEC, a $30 million penalty to the NYAG, and $24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million.

“These cases are the most recent in a series of strong SEC enforcement actions involving dark pools and other alternative trading systems,” said SEC Chair Mary Jo White. “The SEC will continue to shed light on dark pools to better protect investors.”

“Dark pools have a significant role in today’s equity marketplace, and the firms that run these venues must ensure that they do not make misstatements to subscribers about their material operations,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.  “These largest-ever penalties imposed in SEC cases involving two of the largest ATSs show that firms pay a steep price when they mislead subscribers.”

According to the SEC’s order instituting a settled administrative proceeding against Barclays:

  • Barclays said that a feature called Liquidity Profiling would “continuously police” order flow in its LX dark pool and that the firm would run “surveillance reports every week” for toxic order flow.
  • In fact, Barclays did not continuously police LX for predatory trading using the tools it said it would, and it also did not run weekly surveillance reports.
  • Barclays did not adequately disclose that it sometimes overrode Liquidity Profiling by moving some subscribers from the most aggressive categories to the least aggressive.  The result was that subscribers that elected to block trading against aggressive subscribers nonetheless continued to interact with them.
  • Barclays at times misrepresented the type and number of market data feeds that it used to calculate the National Best Bid and Offer in LX.  For example, Barclays represented that it “utilize[d] direct feeds from exchanges to deter latency arbitrage” when in fact Barclays used a combination of direct data feeds and other, slower feeds in the dark pool.

“Barclays misrepresented its efforts to police its dark pool, overrode its surveillance tool, and misled its subscribers about data feeds at the very time that data feeds were an intense topic of interest,” said Robert Cohen, co-chief of the Market Abuse Unit.  “Investors deserve fair and equitable markets without this misbehavior.”

According to the SEC’s orders instituting settled administrative proceedings against Credit Suisse:

  • Credit Suisse misrepresented that its Crossfinder dark pool used a feature called Alpha Scoring to characterize subscriber order flow monthly in an objective and transparent manner.  In fact, Alpha Scoring included significant subjective elements, was not transparent, and did not categorize all subscribers on a monthly basis.
  • Credit Suisse misrepresented that it would use Alpha Scoring to identify “opportunistic” traders and kick them out of its electronic communications network, Light Pool. In fact, Alpha scoring was not used for the first year that Light Pool was operational. Also, a subscriber who scored “opportunistic” could continue to trade using other system IDs, and direct subscribers were given the opportunity to resume trading.
  • Credit Suisse accepted, ranked, and executed over 117 million illegal sub-penny orders in Crossfinder.
  • Credit Suisse failed to treat subscriber order information confidentially and failed to disclose to all Crossfinder subscribers that their confidential order information was being transmitted out of the dark pool to other Credit Suisse systems.
  • Credit Suisse failed to inform subscribers that the Credit Suisse order router systematically prioritized Crossfinder over other venues in certain stages of its dark-only routing process.
  • Finally, CSSU also failed to disclose that it operated a technology called Crosslink that alerted two high frequency trading firms to the existence of orders that CSSU customers had submitted for execution.

“Two Credit Suisse ATSs failed to operate as advertised, and failed to comply with numerous regulatory requirements over a multi-year period,” said Joseph Sansone, Co-Chief of the Market Abuse Unit. “The Commission’s action today sends a strong message that the agency will continue to scrutinize ATSs for compliance with the securities laws.”

The SEC’s order finds that Barclays violated Section 17(a)(2) of the Securities Act, Securities Exchange Act Section 15(c)(3), Rules 15c3-5(c)(1)(i) and 15c3-5(b) of the SEC’s Market Access Rule, and Rules 301(b)(2) and (10).  The order requires Barclays to pay a $35 million penalty, to cease and desist from these violations, censures Barclays, and requires Barclays to engage a third-party consultant to review its marketing of LX, its Market Access Rule compliance, and its compliance with certain requirements of Regulation ATS.

The SEC’s orders find that Credit Suisse violated Section 17(a)(2) of the Securities Act, Rules 301(b)(2), (5) and (10) of Regulation ATS, and Rules 602(b) and 612 of Regulation NMS.  The orders require Credit Suisse to cease and desist from these violations, censure Credit Suisse, and require Credit Suisse to pay $30 million in total penalties, disgorgement of $20,675,510.52, and prejudgment interest of $3,639,643.39. Credit Suisse consented to the SEC’s orders without admitting or denying the findings.

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