Securities Industry Commentator: A legal, regulatory, and compliance feed curated by veteran Wall Street lawyer Bill Singer
Bill Singer
A critic of the inept and incompetent, and an advocate for economic and political sanity. It's a lonely journey but I walk it. Wall Street legal, regulatory, and compliance veteran since 1982.
https://www.rrbdlaw.com/3967securities-industry-commentator/
In today’s Securities Industry Commentator feed:
Latest Internet Crime Report Released / IC3 Says Victim Losses Exceeded $1.4 Billion in 2017 (FBI Press Release) The Internet Crime Complaint Center ("IC3") released its 2017 Internet Crime Report, which presents an often chilling depiction of online scams. A fascinating read!
Nicholas Webb, et al., Plaintiffs-Appellants, v. Financial Industry Regulatory Authority, Inc., Defendant-Appellee.(Opinion, United States Court of Appeals For the Seventh Circuit, 16-CV-04664) In October 2013, Jefferies & Company, Inc. brokers Nicholas Webb and Thad Beversdorf were fired, abd they sued their former employer in the Financial Industry Regulatory Authority's ("FINRA") arbitration forum. Their dispute with Jefferies proceeded in arbitration for the next two-and-a-half years, at which point they withdrew their claims before a final decision was rendered. Under FINRA's rules, that withdrawal constituted a dismissal with prejudice. After the arbitration failed, Webb and Beversdorf sued FINRA in the Circuit Court of Cook County, Illinois, alleging that FINRA breached its contract to arbitrate their dispute with Jefferies by, among other things, failing to properly train arbitrators, failing to provide arbitrators with appropriate procedural mechanisms, interfering with the arbitrators' discretion, and failing to permit reasonable discovery. FINRA removed the dispute to federal court, where it moved to dismiss on multiple grounds, including arbitral immunity. The district court held that FINRA was entitled to arbitral immunity and dismissed the suit. Webb and Beversdorf appeal to the 7th Circuit, which vacated the lower court’s order with instructions to remand to state court..
Money For Nothing Leaves Stockbroker In Dire Straits With FINRA (BrokeAndBroker.com Blog) Money for Nothing. Take the Money and Run. Catchy tunes. You get them in your head and they stay there. Sort of like today's BrokeAndBroker.com Blog in which we watch a stockbroker push the plunger on his career -- even if only for a few months -- because of a measly $555. Maybe this respondent sort of confused a "sweep account" with his "business development account" and figured that he should sweep the year-end remaining balance from his firm into his own pockets? I mean, okay, we all have been tempted by such an impulse from time to time. On the other hand, most of us avoid that temptation. Most of us distinguish between that's mine, that's there's, and, geez, if I get caught this could end in disaster. How's that lyric go? Money for nothing and . . . oops, I don't think the rest of that lyric is still politically correct. How's that other song go? Oh yeah: Bill Mack is a FINRA detective. You know he knows just exactly what the facts is. He ain't gonna let those two escape justice.
FINRA Sanctions Fifth Third Securities, Inc., $6 Million for Cost and Fee Disclosure Failures and Unsuitable Recommendations Related to Variable Annuity Exchanges(FINRA Press Release)
FINRA fined Fifth Third Securities, Inc., $4 million and required the firm to pay about $2 million in restitution to customers for failing to appropriately consider and accurately describe the costs and benefits of variable annuity exchanges, and for recommending exchanges without a reasonable basis to believe the exchanges were suitable. READ the FULL TEXT AWC. The FINRA Press Release noted that this is the "second significant FINRA enforcement action against Fifth Third involving the firm's sale of variable annuities." In a 2009 action, FINRA found that, from 2004 to 2006, Fifth Third effected 250 unsuitable VA exchanges
New Jersey Federal Court Orders Alcibiades Cifuentes, Jennifer Wee Cifuentes, and Cifuentes Fund Management, LLC, to Pay More Than $2.2 Million for Forex Fraud Scheme (CFTC Release 7724-18)
An Order of default judgment and permanent injunction was entered in the United States District Court for the District of New Jersey against Alcibiades Cifuentes, Jennifer Wee Cifuentes, and their corporate entity, Cifuentes Fund Management, LLC. The Court found that from at least April 2013 through March 2015, the Defendants devised a sham commodity pool trading in off-exchange foreign currency, and in order to induce participants to transfer funds, the Defendants made false statements, fabricated account documents, and established a practice, or "demo," forex trading account that involved no actual funds and posed no risk of loss. The Defendants posted "profitable" trades from the demo account online and falsely represented them to be the Defendants' actual trades, without disclosing that the demo account had sustained "losses" exceeding $5 million. Further, Cifuentes and Wee misappropriated pool participants' funds by purchasing luxury vehicles, jewelry, and clothing for themselves. Also, the Defendants engaged in Ponzi-like payments to other victims. READ the FULL TEXT ORDER> Defendants were ordered to pay on a joint and several basis $457,120 in restitution to pool participants, a $1.7 million civil monetary penalty, plus post-judgment interest on both amounts; and they are permanently banned from the markets the CFTC regulates, and permanently enjoined from future violations of the Commodity Exchange Act and CFTC Regulations. In a parallel action, Cifuentes and Wee were indicted on one count of wire fraud conspiracy, four counts of wire fraud, and one count of embezzlement and theft by a commodity pool operator.
Hedge Fund Firm Charged for Asset Mismarking and Insider Trading / CFO Charged With Failing to Supervise Portfolio Managers (SEC Press Release 2018-81) The Securities and Exchange Commission ("SEC") filed two Orders Instituting Administrative Proceedings (the "OIPs") against Respondents Visium Asset Management LP and its Chief Financial Officer Steven Ku. In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Visium and Ku submitted an Offer of Settlement, which the federal regulator accepted. The SEC alleged that Visium had engaged in asset mismarking and insider trading by its privately managed hedge funds and portfolio managers; and, separately, that Ku had failed to respond appropriately to red flags that should have alerted him to the asset mismarking. Visium agreed to settle the SEC's charges by, among other things, disgorging over $4.7 million in illicit profits plus $720,711 in interest, and paying a penalty of more than $4.7 million. Ku agreed to pay a $100,000 penalty and to be suspended from the securities industry for twelve months. READ the FULL TEXT SEC ORDERS
Connecticut Man Sentenced To Prison For Role In $5 Million Investment Fraud Scheme (DOJ Press Release) James Trolice, President and owner of Trolice Consulting Services LLC and President and Chief Marketing Officer of eAgency, pled guilty in the United States District Court for the District of New Jersey to a two-count information charging him with securities fraud and transacting in criminal proceeds. Trolice and Lee Vaccaro sold investors interests in Trolice Consulting Services and other companies controlled by Vaccaro through misrepresentations that such companies held eAgency warrants. Vaccaro pled guilty to his role and was sentenced to 78 months in prison. Trolice was sentenced to 19 months in prison plus three years of supervised release, and ordered him to pay $5,000,512.65 representing the proceeds of his offense.
Former South Bay Resident Convicted Of Defrauding Japanese Investors In Almost $7 Million Ponzi Scheme (DOJ Press Release) After a one-week trial, Kevin Kyes was convicted in the United States District Court for the Northern District of California of one count of conspiracy to commit wire fraud, seventeen counts of wire fraud, one count of conspiracy to commit money laundering, and two counts of money laundering in connection with a nearly $7 million Ponzi scheme involving over 60 Japanese investors. The jury acquitted Kyes of one count of wire fraud.
Former Belmont Resident Convicted of $6 Million Investment Fraud Scheme (DOJ Press Release) After a two week trial in the United States District Court for the District of Massachusetts, John William Cranney, a/k/a Jack Cranney was convicted on three counts of wire fraud, 12 counts of mail fraud, and three counts of money laundering. From 2001 through 2012, Cranney solicited money by representing that he would invest their money in an investment fund or a retirement plan he said he managed. However, instead of investing the money, Cranney spent his victims' savings and retirement on his own bills and debts to fund his declining health and nutrition products distributorship. He set up a sham Employee Stock Ownership Plan to convince victims to transfer their IRA and 401k retirement funds to him.