Securities Industry Commentator by Bill Singer Esq WEEK IN REVIEW
January 20, 2018
http://www.rrbdlaw.com/3780/securities-industry-commentator/
In
today's Securities Industry Commentator
feed:
SEC Staff Letter: Engaging on Fund Innovation and Cryptocurrency-related Holdings In a published letter dated January 18, 2018, SEC Staff write to the Investment Company Institute and the Securities Industry and Financial Markets Association. READ FULL TEXT Staff Letter.In part, the Staff states that it appreciates that:
[P]roponents of cryptocurrencies and related products have identified a range of potential benefits. We are also aware that critics of cryptocurrencies have raised various concerns regarding transparency of information, trading, valuation and other matters related to the nature of the underlying assets. In addition, the innovative nature of cryptocurrencies and related products, as well as their expected use and utility in our financial markets, means that they are, in many ways, unlike the types of investments that registered funds currently hold in substantial amounts. In light of these considerations, we have, at this time, significant outstanding questions concerning how funds holding substantial amounts of cryptocurrencies and related products would satisfy the requirements of the 1940 Act and its rules. To facilitate the start of our dialogue, we have identified below a number of these questions, and we invite you and any interested sponsors to engage with us in detail on these. While we have identified the questions below, we note that the cryptocurrency markets are developing swiftly. Additional questions may arise from these developments. . . .
. . .
Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them. In addition, we do not believe that such funds should utilize rule 485(a) under the Securities Act, which allows post-effective amendments to previously effective registration statements for registration of a new series to go effective automatically. If a sponsor were to file a post-effective amendment under rule 485(a) to register a fund that invests substantially in cryptocurrency or related products, we would view that action unfavorably and would consider actions necessary or appropriate to protect Main Street investors, including recommending a stop order to the Commission. . . .
HSBC
Holdings Plc Agrees to Pay More Than $100 Million to Resolve Fraud
Charges (DOJ Press Release 18-59) Pursuant to the
filing in the United States District Court for the Eastern District of New York
of a two-count Criminal Information charging wire fraud, HSBC Holdings plc
(HSBC) entered into a deferred prosecution agreement (DPA) and agreed to pay a
$63.1 million criminal penalty and $38.4 million in disgorgement and
restitution to resolve charges that it engaged in a scheme to defraud two bank
clients through a multi-million dollar scheme commonly referred to as
"front-running." READ the FULL-TEXT DPA. READ the FULL-TEXT
Information
Joint
Statement by SEC and CFTC Enforcement Directors Regarding Virtual Currency
Enforcement Actions / SEC Co-Enforcement Directors Stephanie Avakian and Steven
Peikin and CFTC Enforcement Director James
McDonald
When market participants engage in fraud under the guise of offering
digital instruments - whether characterized as virtual currencies, coins,
tokens, or the like - the SEC and the CFTC will look beyond form, examine the
substance of the activity and prosecute violations of the federal securities
and commodities laws. The Divisions of Enforcement for the SEC and CFTC will
continue to address violations and bring actions to stop and prevent fraud in
the offer and sale of digital
instruments.
UBS Complex Director Wins Margin Call Battle (BrokeAndBroker.com Blog) The Financial Industry Regulatory Authority recently warned that margin debt has risen sharply in recent months to an all-time high of $627.4 billion. FINRA warns that investors often mistakenly believe that a firm must contact them first for a margin call to be valid. As a recent FINRA expungement arbitration demonstrates, mistaken beliefs about margin calls still abound.
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In
today's Securities Industry Commentator
feed:
Manhattan
Man Arrested For Stealing More Than $1.2 Million Of Rare And Expensive
Wine (DOJ Press Release 18-017) Having been
the third-generation of my family in the wine and liquor business before
becoming a lawyer, this case certainly caught my attention! Nicolas De-Meyer
was indicted in the United States District Court for the Southern District of
New York on one count of interstate transportation of stolen property for his
role in the alleged theft of $1.2 million from a victim who is described in
various press reports as Goldman Sachs Group Inc. Co-President David Solomon.
READ the FULL TEXT
Indictment
FINRA Firm Sues For $5.6 Million In
Unfair Competition Arbitration (BrokeAndBroker.com Blog) As readers of
the BrokeAndBroker.com Blog know, we frequently discuss the dangers of filing
lawsuits -- as in the risk of you suing someone over something that maybe you
shouldn't have hired a lawyer for and wasted your time and, go figure, not only
do you lose your case but to add insult to injury, the guy you sued turned
around, sued you, and, omigod, you really got hammered with damages, interest,
cost, and fees.
CFTC Charges Illinois Traders Richard D.
Carter and Mark R. Slobodnik and their Company, Blue Guru Trading, LLC, with
Fraud / Alleged Ongoing Commodity Pool Fraud Took in at Least $750,000 from at
Least 18 Pool Participants (CFTC Press Release pr7672-18)
The Commodity Futures Trading Commission filed a civil enforcement action in
the U.S. District Court for the Northern District of Illinois, charging
Defendants Richard D. Carter, Mark R. Slobodnik, and their company Blue Guru
Trading, LLC with fraudulent solicitation, issuing false statements, and
misappropriation in connection with investments in their Blue Guru commodity
pool; and with registration violations. A Statutory Restraining Order froze the
assets of Carter, Slobodnik, and Blue Guru, and prohibits the destruction of
their books and records. READ the FULL TEXT Complaint and Restraining
Order
Bureau of Prisons Tests Micro-Jamming Technology in
Federal Prison to Prevent Contraband Cell
Phones
(DOJ Press Release 18-51) The Federal Bureau of Prisons tested micro-jamming
technology to determine if micro-jamming could prevent wireless communication
by an inmate using a contraband device at the individual cell housing unit
level. Contraband cellphones have been an ongoing correctional security and
public safety concern for federal, state, and local correctional agencies
because the devices are used to further ongoing criminal activity, including
threats to public officials, intimidation of witnesses, and continuance of criminal
enterprises.
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In today's Securities Industry Commentator
feed:
Former
Head of Barclays New York Foreign Exchange Operation Indicted for Orchestrating
Multimillion-Dollar Front-Running
Scheme (DOJ Press Release 18-47) The
former head of Barclays Capital Inc.'s (Barclays) New York foreign exchange
trading operation, Robert Bogucki, was indicted in the Northern District of
California on one count of conspiracy to commit wire fraud and six counts of
wire fraud. READ the FULL TEXT INDICTMENT. According to the indictment, in
September and October 2011, Bogucki misused information provided to him by HP,
which had hired Barclays to execute a foreign exchange transaction related to
the planned acquisition of a UK-based
company
FINRA Fines Firm When Unregistered
Principal Acted Presidential (BrokeAndBroker.com Blog) It would
seem a fairly
basic premise of FINRA regulation that you can't act as the President of a
broker-dealer unless you're registered as a principal. Of course, stuff happens
and, you know, sometimes a member firm didn't realize that someone was taking
on a senior role requiring principal registration, and, other times, someone
thought that the guy was registered or that they put the gal's U4 through but,
oh well, our bad. In a recent FINRA regulatory settlement, the self-regulator
goes about its business in exemplary manner and I've got nothing to say in
defense of the respondent firm. Clearly, not the crime of the century and
FINRA's moderate sanctions underscore that point. On the other hand, what the
hell is with the Corrective Action Statement? Why not just take your lumps
quietly, pay the fine, and get on with your business?
In the Matter of Guardian 8 Holdings, Idaho North Resources Corporation, Mecklermedia Corporation, and Verde Science, Inc.(Order Denying Stay, Securities and Exchange Commission, Admin. Proc. Rul. Rel.No. 5465; Admin, Proc, File No. 3-18221 / January 16, 2018 An individual claiming to be a "major shareholder" of Mecklermedia Corporation emailed an SEC ALJ's office requesting "6 months to update filings" so that another entity can purchase Mecklermedia.
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In today's Securities Industry Commentator feed:
Mobile
Phone Industry Executive Sentenced In Manhattan Federal Court To 5 Years In
Prison For Role In Multimillion-Dollar Consumer Fraud
Scheme (DOJ Press Release) Following a
three-week federal criminal jury trial, Fraser Thompson, former Senior Vice
President of Strategic Operations at Mobile Messenger was convicted and
sentenced today to five years in prison and three years of supervised release,
and ordered to forfeit $1,552,114.56. for his participation in a fraudulent
scheme to charge mobile phone customers over $100 million dollars in monthly
fees for unsolicited, recurring text messages without the customers' knowledge
or consent - a practice known as "auto-subscribing." eing
auto-subscribed through Mobile Messenger. THOMPSON, moreover,
personally received over $1.5 million in fraud proceeds as a result of his
participation in the illegal
scheme.
In the
Matter of Michael W. Crow, Alexandre S. Clug, Aurum Mining, LLC, PanAm Terra,
Inc., and The Corsair Group, Inc. (Order
Regarding Inability to Pay Evidence, United States Securities and Exchange
Commission, File No. 3-16318; Admin. Proc. Rul. Release No. 5456 / January 12,
2018) SEC Administrative Law Judge Patil had previously found at a hearing that
Respondent Clug had "convincingly demonstrated his inability to pay
disgorgement or a civil penalty," and, accordingly, the ALJ discounted the
amount of disgorgement and did not impose a civil penalty on Clug. The
Commission remanded for reconsideration at which time the Division of
Enforcement submitted evidence Clug and his wife purchased a home in a cash
transaction. This asset was not disclosed in Clug's financial statement, and
Clug did not update his financial statement before the ALJ issued the initial
decision or while the proceeding was before the Commission on
appeal.