The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
August 24, 2021
RIP Charlie Watts -- End of an era
VOTE for FINRA Small Firm Governor Paige W. Pierce
DBS Throws Director Under the FINRA Regulatory Bus (BrokeAndBroker.com Blog)
Texas Man Pleads Guilty to Wire Fraud for Foreign Exchange Investment Fraud Scheme (DOJ Release)
SEC Charges Healthcare Services Company and CFO for Failing to Accurately Report Loss Contingencies as part of Continuing EPS Initiative (SEC Release)
Federal Court Orders Alabama Man to Pay More Than $16 Million in Precious Metals Fraud (CFTC Release)Statement of Commissioner Dawn D. Stump on the CFTC's Regulatory Authority Applicable to Digital Assets (CFTC Release)FINRA Arbitrator Pens Perfect Rationale in UBS Expungement Award (BrokeAndBroker.com Blog)
VOTE for FINRA Small Firm Governor Paige W. Pierce
On September 1, 2021, FINRA will conduct its annual meeting to elect individuals to fill one small firm seat, one mid-size firm seat and one large firm seat on the FINRA Board of Governors (FINRA Board or Board).
In 1998, I was one of a slate of four petition candidates to run in the first contested Board election against the NASD's hand-picked slate of nominees. In what was then an incredible upset, two of the contested candidates won seats on the NASD Board. In the ensuing years, as a founder of the NASD and the FINRA Dissident Movements, I have continued my efforts to reform our industry and to support candidates in various FINRA elections.
On September 1, 2021, FINRA will conduct its annual meeting to elect individuals to fill one small firm seat, one mid-size firm seat and one large firm seat on the FINRA Board of Governors (FINRA Board or Board).
Bill Singer's Comment:
In 1998, I was one of a slate of four petition candidates to run in the first contested Board election against the NASD's hand-picked slate of nominees. In what was then an incredible upset, two of the contested candidates won seats on the NASD Board. In the ensuing years, as a founder of the NASD and the FINRA Dissident Movements, I have continued my efforts to reform our industry and to support candidates in various FINRA elections.
I have known sitting Small Firm Governor Paige W. Pierce for several years, and I wholeheartedly endorse her Board candidacy and urge eligible voters to cast a proxy in her favor. Paige has earned a second term by her continued advocacy for regulatory reform and fairness.
IF YOU HAVE NOT MAILED IN YOUR BALLOT FOR PAIGE PIERCE BY TODAY, PLEASE GO ONLINE TO VOTE OR TELEPHONE YOUR VOTE FOR THOSE WORKING REMOTE, YOU CAN TELEPHONE FINRA'S OFFICE OF THE CORPORATE SECRETARY at (202) 728-8949 AND OBTAIN YOUR VOTING CODE, THEN USE THAT CODE TO CAST YOUR ONLINE/CALL-IN VOTE.
DBS Throws Director Under the FINRA Regulatory Bus (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/6024/deutsche-bank-awc-oba/
A recent FINRA AWC regulatory settlement looks like a case where an employer threw an employee under the bus, and the regulator gunned the engine and drove over him with relish and delight. There was a time when Wall Street's employers had their employees' backs. Some say that was a problem. Some look back upon those days with wistfulness. Be that as it may, there's no going back, but if this regulatory settlement is any indication, we're not necessarily moving forward but going off the rails.
New York Life Insurance Broker Sentenced to 27 Months in Prison for Securities Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-nj/pr/new-york-life-insurance-broker-sentenced-27-months-prison-securities-fraud-scheme
Ivan Ramos, 39, pled guilty to an Information filed in the United States. District Court for the District of New Jersey to one count of securities fraud; and he was sentenced to 27 months in prison plus three years of supervised release . As alleged in part in the DOJ Release:
Ramos, who worked at New York Life selling life insurance, sought out inexperienced investors seeking low-risk investments. The victims met Ramos after purchasing life insurance through him, or through New York Life marketing events, or through mutual acquaintances. Ramos led his victims to believe, through misrepresentations and omissions, that two entities that he controlled, Invexperts LLC and Wealth Seeds Capital LLC, were associated with New York Life when they were not. The victims believed that the money they entrusted to Ramos would be placed in investments through New York Life, and accordingly multiple victims referenced New York Life on the memo line of their investment checks. One victim, for example, attended a New York Life seminar, then subsequently met with Ramos at his office in Edison, and ultimately invested in Invexperts believing it was associated with New York Life.Ramos falsely told victims that their investments in Invexperts and Wealth Seeds were no-risk with fixed annual returns. Instead of investing their money as he promised he would, Ramos used the funds for purposes not disclosed to the victims, including, among other things, to pay for personal expenses for Ramos and others, to develop a restaurant called "Frisky Bull Barbeque" in Elizabeth, New Jersey, and to repay other investors.Ramos obtained over $1 million in investor money through the fraudulent scheme.
https://www.justice.gov/opa/pr/texas-man-pleads-guilty-wire-fraud-foreign-exchange-investment-fraud-scheme
Kelvin Ramirez pled guilty in the United States District Court for the Southern District of Texas to wire fraud, agreed to pay $687,792.93 restitution, and is awaiting sentencing. As alleged in part in the DOJ Release, Ramirez:
used social media platforms to falsely promote himself as a successful trader of foreign exchange investments or "forex" and attract investors. Through his Instagram accounts, Ramirez marketed "investment groups" and "private accounts" that purportedly traded in forex and were managed by Ramirez. For both types of investments, Ramirez solicited individuals by falsely promising high returns on investments, making false representations about the risk associated with the investments and falsely guaranteeing returns on investment. Through his scheme, Ramirez fraudulently obtained more than $650,000 from over 100 individuals, and then used investors' funds for personal expenses.
SEC Charges Healthcare Services Company and CFO for Failing to Accurately Report Loss Contingencies as part of Continuing EPS Initiative (SEC Release)
https://www.sec.gov/news/press-release/2021-162
Without admitting or denying the findings in an SEC Order https://www.sec.gov/litigation/admin/2021/33-10967.pdf, Healthcare Services Group, Inc. ("HCSG"), the company's former Chief Financial Officer John C. Shea, and Controller Derya D. Warner have agreed to cease and desist from future violations of the charged provisions and pay civil penalties of $6 million, $50,000, and $10,000, respectively. Further, Shea agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies; however, he is permitted to apply for reinstatement after two years. The SEC Order finds that HCSG and Shea violated Sections 17(a)(2) and (3) of the Securities Act; that HCSG violated the financial reporting, books and records, and internal controls provisions of the Securities Exchange Act of 1934; that Shea caused HCSG's violations; and that Warner caused HCSG's books and records and internal controls violations. As alleged in part in the SEC Release:
[I]n 2014 and 2015, HCSG, a provider of housekeeping, dining, and other services to healthcare facilities, failed to timely accrue for and disclose material loss contingencies related to the settlement of private litigation against the company, as required by U.S. Generally Accepted Accounting Principles. By failing to properly record the loss contingencies in the appropriate quarters, which would have had the effect of reducing the company's income, HCSG reported EPS that met to the penny or came close to meeting research analyst consensus EPS estimates and reported multiple quarters of EPS growth, including then-record-high EPS. According to the order, HCSG's former CFO John C. Shea failed to direct the recording or disclosure of the loss contingencies on a timely basis. The order also finds that HCSG's Controller, Derya D. Warner, made other accounting entries that were not supported by adequate documentation as required by company policies.
Federal Court Orders Alabama Man to Pay More Than $16 Million in Precious Metals Fraud (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8416-21
The United States District Court for the Southern District of Texas entered a Consent Order
https://www.cftc.gov/media/6296/%20enfmcallisterconsentorder081821/download against Charles McAllister requiring him to pay $16,186,212.56 in restitution and permanently enjoining him from engaging in conduct that violates the Commodity Exchange Act (CEA), from registering with the CFTC, and from trading in any CFTC-regulated markets. Separately. in a parallel criminal action, on October 4, 2019, a federal jury found McAllister guilty of two counts of wire fraud and one count of engaging in monetary transactions in criminally-derived property; and he was ordered to pay $16,186,212.56 in restitution to his victims (consistent with its order in the CFTC action) and to serve 10 years in federal prison.
https://www.cftc.gov/media/6301/enfmcallisterfinaljudgment081821/download As alleged in part in the CFTC Release:
https://www.cftc.gov/media/6296/%20enfmcallisterconsentorder081821/download against Charles McAllister requiring him to pay $16,186,212.56 in restitution and permanently enjoining him from engaging in conduct that violates the Commodity Exchange Act (CEA), from registering with the CFTC, and from trading in any CFTC-regulated markets. Separately. in a parallel criminal action, on October 4, 2019, a federal jury found McAllister guilty of two counts of wire fraud and one count of engaging in monetary transactions in criminally-derived property; and he was ordered to pay $16,186,212.56 in restitution to his victims (consistent with its order in the CFTC action) and to serve 10 years in federal prison.
https://www.cftc.gov/media/6301/enfmcallisterfinaljudgment081821/download As alleged in part in the CFTC Release:
[T]he order finds that from August 15, 2011 through July 20, 2015, McAllister and his defunct and bankrupt company BullionDirect, Inc. (BDI) defrauded thousands of customers throughout the U.S. who purchased precious metals from or through BDI through various misrepresentations and omissions.According to the order, BDI customers sent money to McAllister and BDI for the purported purchase of gold, silver, palladium, and platinum that was to either be immediately delivered or stored on the customers' behalf. Contrary to their promises, McAllister and BDI did not purchase or store metal for customers, but instead misappropriated the customer funds to pay back other customers, cover BDI business expenses, and invest in other businesses. The order also finds that McAllister and BDI issued false account statements to these customers, showing balances of precious metals and cash that were not in McAllister's or BDI's possession.
Statement of Commissioner Dawn D. Stump on the CFTC's Regulatory Authority Applicable to Digital Assets (CFTC Release)
https://www.cftc.gov/PressRoom/SpeechesTestimony/stumpstatement082321
CFTC Commissioner Stump states:
The CFTC's regulatory oversight authority, as well as the application of our enforcement authority, must be well understood by the public. Only then can proper regulatory compliance be demanded. The recent growth in popularity of crypto products and other digital assets has drawn much attention to the question of how this new financial asset class is regulated in the United States. In response, there has often been a grossly inaccurate oversimplification offered which suggests these are either securities regulated by the Securities and Exchange Commission, or commodities regulated by the Commodity Futures Trading Commission. The prevalence of this misunderstanding about U.S. regulatory delineations has grown to a point that I believe requires correction.Therefore, I have laid out 10 concise points to clarify how and what the CFTC regulates, as well as how Congress has distinguished our enforcement authority from our regulatory oversight. The CFTC does not regulate commodities (regardless of whether or not they are securities); rather, it regulates derivatives-and this is true for digital assets just as for any other asset class. Before considering whether to redesign the regulatory structure in the crypto context, let's get the facts straight about our current system.
http://www.brokeandbroker.com/6014/finra-expungement-rationale/
BrokeAndBroker.com's publisher, Bill Singer, is no fan of FINRA's expungement process. When wearing his white hat as an investor's advocate, Bill sees FINRA's expungement process as little more than a profitable drive-in car wash that cleans dirty records and polishes undeserving reputations. When wearing his black hat as an industry advocate, Bill sees FINRA's expungement process as a cudgel with which broker-dealer employers pound their former employees via mandatory intra-industry arbitration replete with high fees and enervating delays. Notwithstanding Bill's reservations and concerns, a recent FINRA Arbitration Award presented a compelling case for expungement that was deftly handled by a very competent arbitrator.