Securities Industry Commentator by Bill Singer Esq

Merrill Lynch Hit with $3.75 Million in Defamation Damages in Employment Dispute. In the Matter of the Arbitration Between Jeffrey T. Rathmanner, Claimant, v. Merrill Lynch, Pierce, Fenner & Smith, Inc., Respondent (FINRA Arbitration Decision 18-03461)

SEC Charges Issuer and CEO with Violating Whistleblower Protection Laws to Silence Investor Complaints (SEC Release)

SEC Charges Two Men with Fraud and Unregistered Broker Activity (SEC Release)

CFTC Charges Companies and Associates with Failing to Register with the CFTC (CFTC Release)

Baton Rouge Man Pleads Guilty in Federal Court to Multi-Million Dollar Bank and Wire Fraud Schemes (DOJ Release)

FINRA Fines and Suspends Broker Who Copied and Pasted Customer's Signature 28 Times. In the Matter of Brendan James Flick, Respondent (FINRA AWC)

[C]ollectors Cafe and Kontilai attempted to resolve investor allegations of wrongdoing by conditioning the return of investor money on the investors signing agreements prohibiting them from reporting potential securities law violations to law enforcement, including the SEC. According to the complaint, these agreements violate the SEC's whistleblower protection rules. The complaint alleges the defendants went so far as to sue two investors that they believed breached one of the illegal agreements. Following the filing of the SEC's action in May 2019, the defendants allegedly have continued to misrepresent to investors material facts about Collectors Cafe's business and the reasons why Kontilai took money from the company for personal expenses, including continuing to tell investors that he loaned Collectors Cafe millions of dollars in the late 2000s when, in reality, he never lent the company the amounts that he claims.

[B]eginning in at least September 2014, Eden and Pearlman solicited investors to purchase shares of a microcap issuer, Intertech Solutions, Inc. ("ITEC"). Eden and Pearlman allegedly called prospective investors and convinced them to purchase shares of ITEC in their own brokerage accounts at prices and volumes that were coordinated by Eden, Pearlman, and ITEC's undisclosed control person. ITEC's undisclosed control person simultaneously entered sell orders at the coordinated price and volume, making it highly likely that his sell orders and the solicited investors' buy orders would match. Through this matched trading, ITEC's undisclosed control person was able to offload his shares into a ready market. The Commission previously charged ITEC and its control person for fraud and registration violations. Eden allegedly engaged in similar conduct involving other securities and Neumann allegedly assisted Eden's solicitation efforts while earning transaction-based compensation.

[F]rom at least July 2018 to March 2019, on behalf of SSL and, later, SSLS, Ross-Mahmoud and Mahmoud solicited customers to open discretionary trading accounts (or supervised other persons who did so), and offered to trade in customers' retail forex accounts through a "forex autotrader." The autotrader used an algorithm to trade multiple currency pairs, automatically entering and exiting trades without customer intervention. The autotrader also purportedly automatically hedged losing trades to mitigate losses. By virtue of the autotrader, SSL and SSLS exercised discretionary trading authority over retail customers' forex accounts.

As found in the order, respondents marketed the autotrader using the slogan "Our Trades, Your Account," and in promotional video presentations, Mahmoud described the autotrader as "95% hands-off" after initial set up. Although customers were required to set up the autotrader and load periodic updates, those efforts were supported by SSL and SSLS staff. Further, respondents touted the autotrader as suitable for people without any prior forex trading experience. Ross-Mahmoud and Mahmoud and, at their direction, the affiliates of SSL and SSLS, instructed individual customers to open and fund accounts at retail forex exchange dealers and link the accounts to the autotrader.

[W]orley executed schemes to defraud both banks and private equity firms by submitting multiple false and fraudulent loan applications on behalf of himself and of businesses he owned or operated.  Between 2014 and 2018, Worley obtained more than $18 million in new loans from federally-insured banks in Baton Rouge and around the country through materially false and fraudulent statements and representations.  Through a similar scheme, Worley obtained at least an additional $11 million from private equity firms in Louisiana and Texas, also through materially false and fraudulent statements and representations.  During the course of both his bank and wire fraud schemes, Worley inflated his assets, understated and omitted his liabilities, misrepresented his income, and often misrepresented other things including the intended use(s) of millions in loan proceeds.  In some instances, Worley and the businesses he owned, operated, or controlled, defaulted on the loans, causing the financial institutions and private equity funds to suffer financial losses. Worley filed for Chapter 11 bankruptcy in January of 2018.   

Between December 14, 2015 and March 15, 2018, Flick copied and pasted the signature of a customer on 28 separate wire transfer authorization forms without permission. The transactions were quarterly distributions authorized by and done at the customer's instruction to the customer's account or to accounts belonging to the customer's children, and ranged in value from $15,000 to $139,009. 

After Raymond James personnel discovered the altered wire transfer forms during a routine branch examination, Flick inaccurately denied his involvement and suggested that the customer's son photocopied her signature to assist with the paperwork. 

As a result of falsifying the wire transfer authorization forms, Flick violated FINRA Rule 2010. 

• Securities Industry Commentator
• Bill Singer