Securities Industry Commentator by Bill Singer Esq

In order to open the restaurant and obtain a bank loan, Gyulai represented to shareholders that he and his relative had invested $140,000 of their own funds, the complaint states.  Gyulai had in fact borrowed those funds from family and friends, and in 2013, he used company funds to pay them back, while concealing the payments from other shareholders, the complaint states.  The following year, Gyulai made payments to himself and his relative totaling approximately $140,000 as a purported return of their initial capital, even though they had not invested their own money in the restaurant, the complaint states.  Gyulai had thus paid himself and his relative double the purported initial investment amount, to the detriment of other shareholders, according to the complaint.  He also used company funds for personal stock trading during the operation of the restaurant, the complaint states.

standardized, favorable settlement terms to investment advisers that self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees by the adviser, its affiliates, or its supervised persons for investing advisory clients in a 12b-1 fee paying share class when a lower-cost share class of the same mutual fund was available for the advisory clients. Among other things, for eligible advisers that participate in the SCSD Initiative, the Division will recommend settlements that will require the adviser to disgorge its ill-gotten gains and pay those amounts to harmed clients, but not impose a civil monetary penalty. The Division warns that it expects to recommend stronger sanctions in any future actions against investment advisers that engaged in the misconduct but failed to take advantage of this initiative.it will agree not to recommend financial penalties against investment advisers who self-report violations relating to certain mutual fund share class selection issues and promptly return money to harmed clients.

These proceedings arise out of the failure of DBSI and Solomon reasonably to supervise DBSI traders, and for DBSI reasonably to supervise DBSI salespeople, to prevent and detect violations of the antifraud provisions of the federal securities laws in connection with DBSI's secondary market transactions in non-agency commercial mortgage-backed securities ("CMBS"). These transactions took place between 2011 and 2015 (the "Relevant Period"), when traders on the DBSI CMBS secondary trading desk ("CMBS Desk") and CMBS sales personnel made false and misleading statements to customers in an effort to increase the difference between the DBSI's purchase price and sales price and, thereby, increase DBSI's profit. 

DBSI failed to establish and/or implement policies and procedures reasonably designed to prevent and detect traders and salespeople from making these false and misleading statements to customers. Solomon failed reasonably to supervise the traders on the CMBS Desk by failing to take appropriate action to prevent them from making such false and misleading statements to customers. 

In considering the charges brought and the relief imposed in this matter, the Commission has taken into consideration the significant cooperation that DBSI and Solomon have provided throughout the investigation

• Securities Industry Commentator
• Bill Singer