Securities Industry Commentator by Bill Singer Esq

Petition Process for Additional Candidates

A person who has not been nominated by the Nominating Committee for election to the FINRA Board may be included on the ballot for the election of governors if:

a. within 45 days after the date of this Election Notice (Monday, June 22, 2020), such person presents to FINRA's Corporate Secretary petitions in support of his or her nomination, duly executed by at least 3 percent of FINRA member firms entitled to vote for such nominee's election. If, however, a candidate's name appears on a petition in support of more than one nominee, the petition must be endorsed by 10 percent of FINRA member firms entitled to vote for such nominees' election; and

b. the Corporate Secretary certifies that such petitions have been duly executed by the executive representatives of the requisite number of FINRA member firms entitled to vote for such person's election, and the person being nominated satisfies the classification of the governorship to be filled.

As of the close of business on Thursday, May 7, 2020, the number of FINRA large firms was 166, and the number of small firms was 3,165. Therefore, the requisite number of petitions for a large firm petitioner is 5, and the requisite number of petitions for a small firm petitioner is 95.

Firms may only endorse one petitioner for the same firm size seat as their own. No firm may endorse more than one such petitioner.

Petitioners must submit sufficient information to determine the person's status with respect to the category for which he or she is petitioning to be nominated. Individuals seeking nomination for election as a Large Firm Governor or a Small Firm Governor have an obligation to satisfy the firm-size classification on the date the petition is circulated, the date the petitions are certified by FINRA's Corporate Secretary, and the date of the annual meeting. Individuals who fail to meet this requirement will be disqualified from election. 

Petitioners must also provide information sufficient for the Corporate Secretary to determine that the petitions are duly executed by the executive representatives of the requisite number of applicable size firm members. In addition, to assist in the process of verifying petitions, FINRA requests that all petitions submitted be dated by their signatory.

Petitions must be submitted no later than Monday, June 22, 2020.

The names of persons obtaining the requisite number of valid petitions will be included on the appropriate proxy mailed to eligible firms in advance of the annual meeting. . . 

"As a farmer, the dilemma I've got right now, is we don't have a market. I've got crops going to be there to harvest, and I don't know if we'll have someone to sell to or not." In a few weeks, Burkett said he will have more than 120,000 ears of sweet corn to harvest - all meant to go to restaurants that may or may not need them.

"My biggest fear is the fear of how long this is going to last. I have to decide now what I'm going to plant in the fall. I've got to order seeds, get the ground ready," Burkett said. He's decided, for example, to go ahead and plant seedless watermelons, so they'll be ready to sell this fall to the New Orleans school system - and he'll have to hope the schools are open.

It's not just doctors' offices in New York, the epicenter of the coronavirus epidemic in the U.S., that are experiencing financial hardship. Some 51% of primary-care providers are uncertain about their financial future over the next four weeks, and 42% have either laid off or furloughed staff, according to a survey of 2,700 practices across the U.S. by the nonprofit Primary Care Collaborative and Larry A. Green Center. In addition, 13% predict closure within the next month. 

Small ranchers like Tim Hoven, who runs an organic beef farm near Eckville, Alberta, have years-long relationships with small butchers that are now seeing massive demand. Neighbors, used to delivering to the big plants, are left with cattle that have nowhere to go.

The Community House Improvement Program, which represents about 4,000 landlords of rent-stabilized apartment buildings in the city, said that about two-thirds of ground-floor retail tenants did not pay rent in April and May. Before the crisis, the figure was about 15 percent per month.

"Unless the federal government steps in to help renters and owners in a big way, we are going to see a housing disaster the likes of which we have never seen," Jay Martin, CHIP's executive director, said in a statement. "Congress must provide financial aid directly to renters and the state must match that with property tax relief for owners or in weeks, not months, we will see buildings going under."

In one of the schemes (the "Advertising Scheme"), SADLEIR misappropriated millions of dollars in funds from Aviron that had been invested in Aviron by the Fund.  SADLEIR represented to the Fund that this money had been invested by Aviron in pre-paid media credits with the advertising placement company MediaCom Worldwide, LLC ("MediaCom"), which is a subsidiary of the advertising and media agency GroupM Worldwide Inc. ("GroupM Worldwide").  Instead, SADLEIR, using the bank account for a sham entity he had created, illicitly transferred out of Aviron over $25 million of those funds.  Specifically, SADLEIR created a sham New York-based company called GroupM Media Services, LLC (the "Sham GroupM LLC") designed to appear as if it was the legitimate entity, GroupM Worldwide, and a corresponding bank account in the name of that sham entity.  SADLEIR then used a significant portion of those illicitly transferred funds for his personal benefit, including to purchase a private residence in Beverly Hills for approximately $14 million.  SADLEIR then falsely represented to the Fund that Aviron had purchased an approximately $27 million balance in pre-paid media credits with MediaCom that were available to promote future Aviron films, and pledged a portion of those credits to the Fund as collateral for additional loans, when in fact the claimed credits did not exist due to SADLEIR's misappropriation.  As part of these false representations, SADLEIR also created a fake identity of a purported New York-based female employee of the Sham GroupM LLC named "Amanda Stevens" who corresponded with a representative of the Fund, ensuring the Fund that Aviron had an approximately $27 million balance in pre-paid media credits with the Sham GroupM LLC.  In fact, SADLEIR himself posed as Amanda Stevens when engaging in email exchanges with a representative from the Fund.

In the other scheme (the "UCC Scheme"), SADLEIR engineered the illicit and fraudulent sale and refinancing of assets worth an estimated $3 million that secured the Fund's loans to Aviron.  The Fund had secured its investment in Aviron by, among other means, obtaining UCC liens in 2017 and 2018 on certain intellectual property and other assets relating to Aviron's films.  In 2019, SADLEIR used the forged signature of one of the Fund's portfolio managers on releases to remove the Fund's UCC liens on certain of these secured assets in order to sell or refinance them without the Fund's consent, thus depriving the Fund of its collateral on outstanding loans, loans on which Aviron ultimately defaulted.       

The SEC alleges that BlackRock Multi-Sector Income Trust (BIT), a registered closed-end management investment company, invested approximately $75 million in Aviron Group LLC, a film distribution company founded, owned, and operated by Sadleir.  The complaint alleges that Sadleir represented that the investments would be used to support the company's distribution of films.  Contrary to these representations, Sadleir allegedly used a sham company as a vehicle to fraudulently divert and misappropriate BIT funds and issued fake invoices seeking BIT funds for services that were never provided.  Sadleir allegedly used the funds to pay personal expenses, including his purchase, furnishing, and renovation of a Beverly Hills mansion.

[F]rom at least January 2018 through the present, Paul Horton Smith, Sr. offered and sold securities in his company, Northstar Communications, LLC, and used his investment advisory firm, eGate, LLC, and insurance and estate planning company, Planning Services, Inc., to market the securities. Smith and Northstar, through free workshops and other investor events, allegedly promised investors guaranteed annual interest payments between 3 percent and 10.5 percent if they invested in so-called "private annuity contracts." In reality, as the complaint alleges, Smith did not invest the funds raised in any securities and instead used new investor funds to pay investor returns in a Ponzi-like fashion. According to the complaint, Northstar raised more than $5.6 million from at least 35 investors and paid out $5.2 million to those investors as interest payments or principal returned. Smith also allegedly used investor funds to settle investor fraud lawsuits.

• Securities Industry Commentator
• Bill Singer