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SEC Seeks Order Against 235 Entities Affiliated with Woodbridge Group of Companies, LLC to Produce Documents to SEC

The Securities and Exchange Commission has filed a subpoena enforcement action against 235 limited liability companies (the “LLCs”) based in Delaware and Colorado seeking an order requiring the production of documents.

According to the SEC’s application and supporting papers, filed in federal court in Miami:

  • The SEC is investigating whether Woodbridge or others have violated, or are violating, the antifraud, broker-dealer and securities registration provisions of the federal securities laws in connection with Woodbridge’s receipt of over $1 billion of investor funds from thousands of investors nationwide.
  • The LLCs appear to have engaged in financial transactions with the Woodbridge Group of Companies, LLC, of Sherman Oaks, California, and may be owned and/or controlled by Woodbridge’s President, Robert Shapiro.
  • As part of the SEC’s ongoing investigation, on August 16 and 17, 2017, agency staff in the Miami Regional Office served each of the LLCs, through their registered agents, with subpoenas seeking the production of documents which identify corporate membership and financial account information.
  • The SEC’s application alleges that, although the LLCs were required to produce these documents by August 30 and 31, to date, they have failed to produce any documents.

The SEC’s application seeks an order from the federal district court compelling respondents to comply with the SEC’s subpoenas. This is the SEC’s second subpoena enforcement action in its continuing fact-finding investigation which, to date, has not concluded that any individual or entity has violated the federal securities laws.

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

Recovery for Woodbridge investors

Frank Capuano of Royal Alliance Associates, Inc. agreed to findings that he sold approximately $1.1 million in Woodbridge Mortgage Investment Funds notes to customers of the firm.  Capuano also consented to findings that he failed to obtain written approval from his firm for these transactions.
Initiated By FINRA
Resolution
Acceptance, Waiver & Consent(AWC)
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$10,000.00
Sanctions
Suspension
Registration Capacities Affected
All capacities
Duration
12 months
Start Date
5/2/2016
End Date
5/1/2017

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.

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