The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq WEEK IN REVIEW

July 14, 2018




PUBLIC NOTICE to all FINRA Candidates for Board of Governors. In keeping with its past policy, the BrokeAndBroker.com Blog offers free "Guest Blog" posting to all candidates. Please contact publisher Bill Singer, Esq. at rrbdlawyer@gmail.com to arrange for the posting of your statement of candidacy and links to your election materials. 
See these past postings for guidance: 
CFTC Announces Its Largest Ever Whistleblower Award of Approximately $30 Million (CFTC Press Release 7753-18) In awarding its fifth and largest award to date under its Whistleblower Program, CFTC awarded about $30 million to a whistleblower. According to "JPMorgan Whistle-Blower Gets Record $30 Million From CFTC" (Bloomberg.com by Neil Weinberg and Matt Robinson) the "award was the result of information that helped the agency sanction JPMorgan Chase & Co. for failing to properly inform some wealthy clients about conflicts of interest behind its investment recommendations. . ." READ FULL TEXT CFTC AWARD 

Ryan Gilbertson was convicted in the United States District Court for the District of Minnesota on 21 counts of wire fraud, securities fraud, and conspiracy to commit securities fraud; and Douglas Hoskins,was convicted on 6 counts of wire fraud, securities fraud, and conspiracy to commit securities fraud. The SEC had alleged, in part, that Gilbertson enlisted friends and associates including Hoskins to choreograph extensive sales and purchases of Dakota Plains stock, which rose from 30 cents to more than $12 per share during a 20-day period.  The allegedly inflated stock price obligated Dakota Plains to make bonus payments totaling $32,851,800 to Gilbertson and others. READ the FULL TEXT SEC Complaint 

In today's BrokeAndBroker.com Blog, we feature a FINRA arbitration in which a public customer seeks at least $2 million in damages against Raymond James. As is often the case in such sales-practices disputes, unnamed registered representatives are required to disclose on their industry records the customer's allegations. If the customers prevail with their claims, then the registered reps sort of get what's coming to them. If the customers fail, the reps are forced to pursue FINRA's time consuming and expensive expungement process. As today's case demonstrates, FINRA's version of mandatory customer and intra-industry arbitration is often unfair and seems little more than a Mickey Mouse profit-center for the self-regulatory-organization.

The Texas State Securities Board issued an Emergency Cease and Desist Order naming the following companies allegedly controlled by Darren Olayan::

Mintage Mining LLC, which is illegally and fraudulently issuing and offering two different investments in the mining of cryptocurrencies;
Symatri LLC, which issued a new cryptocurrency called Kala and, with Mintage Mining, is offering investors the opportunity to own and possess pre-configured computer hardware to mine Kala;
NUI Social, a multi-level marketing company that purports to have more than 300,000 members in 140 countries. NUI recruits individuals for the cryptocurrency investments, with some of its "members" eligible to earn commissions for the people they recruit. 

The TSSB Order also names Wyatt McCullough, who is allegedly affiliated with NUI Social, and William Douglas Whetsell. TSSB alleges that McCullough and Whetsell are publishing advertisements targeting Texas residents and claiming that Mintage can generate up to 250% annual returns  by successfully mining cryptocurrencies. READ the FULL TEXT Cease and Desist Order

SEC Charges Oil and Gas Company and Top Finance Executives with Accounting Fraud (SEC Litigation Release No. 24195) The SEC filed a Complaint in the United States District Court for the Southern District of New York charging:

1) Penn West Petroleum Ltd., d/b/a Obsidian Energy Ltd., Todd H. Takeyasu, Jeffery A. Curran, and Waldemar Grab with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
2) Penn West with violating Section 17(a) of the Securities Act of 1933, Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Exchange Act Rules 12b-20, 13a-1, and 13a-16;
3) Takeyasu, Curran, and Grab with violating Securities Act Sections 17(a)(1) and 17(a)(3), Exchange Act Section 13(b)(5), and Exchange Act Rules 13b2-1 and 13b2-2, and with aiding and abetting Penn West's violations of Securities Act Section 17(a), Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-16; and 
4) Takeyasu with violating Exchange Act Section 13a-14 and Section 304(a) of the Sarbanes-Oxley Act of 2002. 

The Complaint alleges that Penn West's former CFO Takeyasu, former vice president of accounting and reporting Curran, and former operations controller Grab manipulated the company's operating expenses in order to lower the publicly reported cost of oil extraction and processing. The SEC seeks permanent injunctions and monetary relief against all the defendants, officer-and-director bars from Takeyasu and Curran, and a clawback of incentive-based compensation awarded to Takeyasu. Without admitting or denying the allegations or findings, Grab has agreed to a settlement including permanent injunctions and an officer-and-director bar, and also a permanent suspension from appearing and practicing before the SEC as an accountant.

CFTC issued an Order filing and settling charges against Lansing Trade Group, LLC for its attempted manipulation of the price of certain wheat futures and options contracts that were traded on the Chicago Board of Trade (CBOT) and for aiding and abetting the attempted manipulation of the cash price for Columbus Corn. Lansing will pay a $3.4 million civil monetary penalty, undertake remedial measures, and cease and desist from further violations of the CEA and CFTC Regulations, as charged.
Separately, CME Group Inc. issued a Notice of Disciplinary Action (NDA) in which Lansing agreed to pay a fine of $3.15 million arising out of the attempted manipulation of the wheat futures contracts that is the subject of the CFTC's Order. READ FULL TEXT CFTC Order 




Tully Lovisa, Shaun Sullivan, and Lorraine Chalavoutis were indicted with mail fraud, money laundering, and conspiring to commit those offenses; and Lovisa was further charged with perjury and additional wire fraud and money laundering offenses. These three defendants allegedly ran a fraudulent mass-mailing scheme that victimized many elderly and collected at least $30 million in fees for falsely promised prizes. In 2010, the Federal Trade Commission had sued Lovisa for deceptive price-promotion mailings and the Court enjoined him from further involvement in same.Separately, Eugene Marotta was charged by Information with one count of conspiracy to commit mail fraud in connection with his role as a co-conspirator in a scheme that deceived mail recipients into believing that they had won hundreds of thousands of dollars as well as an "exclusive liquidation asset" subject to a $161.25 liquidation fee. Further, Steven Keats pled guilty to a charge of conspiracy to commit mail fraud in connection with allegations that while working at a list brokerage firm, he arranged provided consumers' names and addresses to a fraudulent mailer, who falsely informed recipients that they had won large cash prizes redeemable for a $50 fee. Keats admitted knowing that the names and addresses that he supplied would be used to send these deceptive mailing pieces to victims across the United States.

Allen v. Credit Suisse Secs (USA) LLC (Opinion, United States Court of Appeals for the Second Circuit 16‐CV-3327). This ERISA action challenged the conduct of 12 banks and their affiliates in the FX market from January 2003 through 2014. Plaintiffs alleged that defendants took advantage of their dominant wholesale and retail positions in the wholesale and retail FX markets to capitalize on their knowledge of customers' order flows and attendant information to the detriment of their customers, including plaintiffs' ERISA Plans. Plaintiffs allege defendants manipulated benchmark fixing rates and exploited the rate calculating methodology. READ FULL TEXT 2Cir Opinion

SEC Files Additional Charges in Fitbit Stock Manipulation Scheme (SEC Press Release)
In furtherance of its case alleging the manipulation of Fitbit securities through false regulatory filings, the filed a Complaint in the United States District Court for the Southern District of New York against a second defendant, Mark E. Burns, alleging that he purchased Fitbit call options just minutes before he and his alleged co-conspirator, Robert W. Murray, filed a fake tender offer on the SEC's EDGAR system (in the name of ABM Capital LTD, an allegedly nonexistent company for which the defendants purportedly created an EDGAR account) purporting to acquire Fitbit's shares at a substantial premium. Murray agreed to settle the SEC's charges. READ the FULL TEXT Complaint.

Cut, Pasted, Traced, Signed, Sealed, Delivered . . . and Suspended by FINRA (BrokeAndBroker.com Blog) As the BrokeAndBroker.com Blog has covered in the past and apparently will continue to cover into the future, we got another registered rep who figures that customer service includes saving his customers the time and inconvenience of actually signing on the dotted line. In this digital age, you'd sort of think that those taking the old signature short-cut would scan a customer's signature and affix it onto a PDF document. On the other hand, as evidenced in today's featured FINRA regulatory settlement, some folks are old-school and on this throwback Thursday, we got an old-fashioned bit of cut-and-paste and an even more prehistoric tracing! Which makes me wonder when someone will pull out a sheet of carbon paper or, who knows, maybe send me something via fax.

Deputy Attorney General Rod J. Rosenstein Delivers Remarks Announcing the Establishment of the Task Force on Market Integrity and Consumer Fraud (Remarks of DAG Rosenstein)

Remarks on the Establishment of the Task Force on Market Integrity and Consumer Fraud (Remarks of SEC Chairman Jay Clayton)

Securities Industry Commentator: A legal, regulatory, and compliance feed curated by veteran Wall Street lawyer Bill Singer



Travelin' Man Comes To End of Wall Street Line (BrokeAndBroker.com Blog) We've all been there. That moment when we pondered whether to do or not to do something that we knew was wrong but, hey, not all that wrong and, c'mon, who the hell is going to find out? There were benefits to consider. There were costs to weigh. We attempted to calculate whether right outweighed wrong but, oh my, the dollar signs flashed and the thrill of ragin' against the machine got a hold of our moral compass, and, crap, everything froze and all we could do was hold down the power switch and hope the re-boot would work. For the lucky among us, after our brain temporarily shut down and we re-booted, we were safely returned to the last restore point with no harm.  We swore on everything holy that we would never, ever make such a stupid mistake again. For the unlucky among us, there was no reboot other than the dreaded blue screen and a hopelessly corrupted BIOS -- and to make matters worse, we never bothered to make a back-up. In a recent FINRA regulatory settlement, we come across one associated person with a penchant for travel and an operating system that crashed and never got its owner back to a safe restore point.

New York Man Indicted on Bank Fraud Conspiracy, Producing/Passing Fictitious Obligations, Access Device Fraud, and Aggravated Identity Theft (DOJ Press Release) Gianni Armani Vincent was indicted in the United States District Court for the Eastern District of North Carolina on one count of Conspiracy to Commit Bank Fraud, two counts of Producing/Passing Fictitious Obligations, two counts of Access Device Fraud, and two counts of Aggravated Identity Theft. Frankly, Vincent seems an ambitious fellow. As set forth in part in the DOJ Press Release:

The indictment alleges that beginning in or around September 2016, and continuing until in or around March 2018, VINCENT and his co-conspirators engaged in a scheme to defraud financial institutions out of money by producing and depositing counterfeit checks into conspirator bank accounts.  Additionally, VINCENT is alleged to have been involved in access device fraud by possessing numbers that granted him access to the bank accounts of unsuspecting consumers.  According to evidence and testimony presented at VINCENT's recent detention hearing, when the Cary Police Department and United States Secret Service encountered VINCENT on December 1, 2017, he was in possession of over two-hundred counterfeit checks, a computer with check-writing software, approximately twenty-five counterfeit cards, and more than fifty account numbers, among other things.    

SEC Charges Former Heartland CEO, Romantic Partner in Insider Trading Scheme (DOJ Litigation Release No. 24191) The SEC filed a Complaint in the United States District Court for the District of Connecticut alleging that former Heartland Payment Systems, Inc. CEO Robert O. Carr  and "his romantic partner" (also called his "longtime girlfriend") Katherine M. Hanratty used nonpublic information about an impending acquisition of Heartland by another payment processing company to generate more than $250,000 of illicit profits. Okay, sure, we got two folks allegedly conspiring to engage in insider trading but, geez, it is 2018 and you'd sort of think that the SEC might just be a bit less sexist these days? How nice that the federal regulator refers to Hanratty as Carr's "romantic partner" and "longtime girlfriend." Just throwing this out here but, hmmmm, you think the SEC would ever refer to the male conspirator as "her romantic parnter" and "longtime boyfriend?" My two cents on my own question is "no." READ the FULL TEXT SEC COMPLAINT.

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Romano Brothers & Company submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of Romano Brothers & Company, Respondent (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; '34 Act Release No. 83613; Invest. Adv. Act Rel. No.4965; Admin. Proc. File No. 18590 / July 10, 2018) (the "OIP"). In accordance with the OIP, Romano Brothers was censured, ordered to cease-and-desist, and sahll pay a $15,000 civil money penalty As set forth under the "Summary" portion of the OIP:

These proceedings arise out of Romano Brothers' violation of the testimonial rule under the Advisers Act which states that it shall constitute a fraudulent, deceptive or manipulative act, practice, or course of business for any SEC-registered investment adviser to publish, circulate or distribute any advertisement which refers to, among other things, any testimonial of any kind concerning the investment adviser. Specifically, Romano Brothers violated the testimonial rule by publishing two videos containing client testimonials about Romano Brothers and the advice and services it renders. These testimonial videos were available to the public on both Romano Brothers' public website and on YouTube.com from approximately August 2012 through April 2017. By publishing videos containing client testimonials, Romano Brothers violated Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, HBA Advisors, LLC, and Jaime Enrique Biel submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of HBA Advisors, LLC, and Jaime Enrique Biel, Respondent(Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; Invest. Adv. Act Rel. No.4963; Admin. Proc. File No. 18588 / July 10, 2018) (the "OIP"). In accordance with the OIP, HBA was censured; and HBA and Biel were ordered to cease-and-desist, and pay a $15,000 and $10,000 civil money penalty respectviely. As set forth under the "Summary" portion of the OIP:I 

These proceedings arise out of HBA's violations and Biel's causing HBA's violations of the testimonial rule under the Advisers Act, which states that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business for any investment adviser registered with the Commission to publish, circulate or distribute any advertisement which refers to, among other things, any testimonial of any kind concerning the investment adviser. HBA violated, and Biel caused HBA to violate, the testimonial rule under the Advisers Act by publishing on the internet advertisements containing testimonials concerning HBA, Biel and the investment advice and services they render. The testimonials were available to the public on various websites, including Yelp.com and Facebook.com. By publishing statements containing client testimonials on the internet, HBA violated, and Biel caused HBA to violate, Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder. 

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, William M. Greenfield submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of William M. Greenfield, Respondent (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; Invest. Adv. Act Rel. No.4961; Admin. Proc. File No. 18586 / July 10, 2018) (the "OIP"). In accordance with the OIP, Greenfield was ordered to cease-and-desist, and  pay a $10,000 civil money penalty As set forth under the "Summary" portion of the OIP:

These proceedings arise out of Greenfield's causing violations of the testimonial rule under the Advisers Act which states that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business for any investment adviser registered with the Commission to publish, circulate or distribute any advertisement which refers to, among other things, any testimonial of any kind concerning the investment adviser. Greenfield caused TFS Securities, Inc. ("TFS") to violate the testimonial rule under the Advisers Act by publishing on the internet advertisements containing testimonials concerning the investment advice and services he renders as an investment adviser representative of TFS. From approximately September 2015 through January 2017, these testimonials were available to the public on Facebook.com and Google.com webpages that Greenfield maintained for his business. By publishing statements containing client testimonials, Mr. Greenfield caused TFS to violate Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder.

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Brian S. Eyster submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of Brian S. Eyster, Respondent (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; Invest. Adv. Act Rel. No.4962; Admin. Proc. File No. 18587 / July 10, 2018) (the "OIP"). In accordance with the OIP, Eyster was ordered to cease-and-desist, and  pay a $10,000 civil money penalty As set forth under the "Summary" portion of the OIP:

These proceedings arise out of Eyster's causing violations of the testimonial rule under the Advisers Act, which states that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business for any investment adviser registered with the Commission to publish, circulate or distribute any advertisement which refers to, among other things, any testimonial of any kind concerning the investment adviser. Eyster caused ON Investment Management Co. ("ONIMCO") to violate the testimonial rule under the Advisers Act by publishing on the internet advertisements containing testimonials concerning Eyster and the investment advice and services he renders as an investment adviser representative of ONIMCO. The testimonials were available to the public on, among other places, YouTube.com and a website Eyster maintained for his business. By publishing statements containing client testimonials, Eyster caused ONIMCO's violations of Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder.

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Leonard S. Schwartz submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of Leonard S. Schwartz, Respondent (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; Invest. Adv. Act Rel. No.4964; Admin. Proc. File No. 18589 / July 10, 2018) (the "OIP"). In accordance with the OIP, Schwartz was ordered to cease-and-desist, and  pay a $35,000 civil money penalty As set forth under the "Summary" portion of the OIP:

These proceedings arise out of Schwartz's role in causing violations of the testimonial rule under the Advisers Act, which states that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business for any investment adviser registered with the Commission to publish, circulate or distribute any advertisement which refers to, among other things, any testimonial of any kind concerning the investment adviser. Between March 2015 and March 2016, Schwartz was a cause of four registered investment advisers' violations of the testimonial rule under the Advisers Act when he collected and published on the internet on behalf of each of them advertisements containing testimonials concerning the investment advisers and the investment advice and services they rendered. The testimonials were available to the public on various websites, including YouTube.com, Google.com, Facebook.com, Twitter.com, and Yelp.com. By publishing client testimonials on the internet, the investment advisers violated, and Schwartz caused violations of Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder




SEC Charges Charles Schwab with Failing to Report Suspicious Transactions (SEC Litigation Release No. 24189) In a Complaint filed in the United States District Court for the Northern District of California, the SEC alleged that Charles Schwab & Co., Inc. he SEC's complaint charges Schwab with failing to file Suspicious Activity Reports (SARs) on the suspicious transactions of 83 independent investment advisers that it terminated from using Schwab to custody their client accounts, in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder. The Complaint alleged that  at least 47 of the terminated advisers engaged in transactions through Schwab that it knew, suspected, or had reason to suspect were suspicious and required the filing of a SAR. Schwab agreed to settle the action by consenting, without admitting or denying the allegations of the complaint, to the entry of a permanent injunction and the payment of a $2.8 million civil penalty. READ the FULL TEXT COMPLAINT

In a FINRA Arbitration Statement of Claim filed in May 2016, Claimant Brown asserted age discrimination; breach of contract for failure to pay the agreed upon basis points on Dyal Fund assets under management; breach of contract for failure to continue the agreed upon amount of carried interest; retaliation for alleged whistleblowing under the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and a declaratory judgment. In the Matter of the Arbitration Between Jeffry Paul Brown, Claimant, v. Neuberger Berman LLC and NB Alternatives Advisers LLC, Respondents (FINRA Arbitration Decision, 16-01342) Respondents generally denied the allegations and asserted various affirmative defenses. The FINRA Arbitration Panel denied Claimant's claims.

Stockbrokers Victimized By Customer Imposter And FINRA Fees And Charges 
(BrokeAndBroker.com Blog) FINRA continues to have a hard time understanding the concept of "victim." In a recent FINRA expungement arbitration, two stockbrokers were victimized by complaints falsely filed against them by an imposter. Given that the customer repudiated the complaints, there isn't much dispute about them being bona fide. You'd sort of think that FINRA would have a procedure to quickly and without cost secure the expungement of such bogus complaints from a stockbroker's record. After reading today's featured BrokeAndBroker.com Blog case, you may wish to re-think your concepts of fair and reasonable.

SEC Obtains Final Judgments Against Attorney and Law Firm Business Manager Charged with IIIegal Sales of Ubi Blockchain Internet Stock (SEC Litigation Release No. 24190) In a Complaint filed in the United States District Court for the Southern District of New York, the SEC alleged that T.J. Jesky, Esq. and his law firm's business manager Mark F. DeStefano received 72,000 restricted shares of UBI Blockchain stock to be sold at a fixed price of $3.70 per share under the registration statement' however, Jesky and DeStafano sold the shares from $21.12 to $48.40. Without admitting or denying the allegations in the SEC's complaint, Jesky and DeStefano agreed to return approximately $1.4 million of allegedly ill-gotten gains, pay $188,682 in civil penalties and be subject to permanent injunctions.

Former CEO and CFO of ITT Barred and Ordered to Pay Penalties (SEC Litigation Release No. 24188) In a Complaint filed in the United States District Court for the Southern District of Indiana, the SEC alleged that former ITT Educational Services Inc.CEO Kevin Modany and former CFO Daniel Fitzpatrick fraudulently concealed the poor performance and looming financial impact of two student loan programs that ITT financially guaranteed. Without admitting or denying the allegations in the Complaint, Modany and Fitzpatrick settled to the SEC's claims charging them as control persons for ITT's fraud and other violations. The Court barred Modany and Fitzpatrick from serving as officers and directors of public companies for five years, and ordered them to respectively pay penalties of $200,000 and $100,000.  Further, Modany and Fitzpatrick were enjoined from controlling any person who violates Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Finally, Modany and Fitzpatrick agreed to be suspended from appearing and practicing before the SEC as accountants with permission to apply for reinstatement after five years.




Two Defendants Convicted on All Counts for International Computer Hacking and Securities Fraud Scheme / Defendants Were Part of a Scheme that Made $30 Million in Profits by Trading on Press Releases Stolen by Hackers from Major Newswire Companies (DOJ Press Release) After a four-week trial, former hedge fund manager Vitaly Korchevsky, and securities trader Vladislav Khalupsky were convicted in the United States District Court for the Eastern District of New York on conspiracy to commit wire fraud, conspiracy to commit securities fraud and computer intrusion, conspiracy to commit money laundering and two counts of securities fraud in connection with their roles in an international scheme to hack into Marketwired L.P., PR Newswire Association LLC, and Business Wire, and steal yet-to-be published press releases containing non-public financial information that included, among hundreds of others: Align Technology Inc.; CA Technologies; Caterpillar Inc.; Hewlett Packard; Home Depot; Panera Bread Co.; and Verisign Inc. The trading produced about $30 million in illegal profits.  

Former ITT Educational Services Inc.CEO Kevin Modany and former CFO Daniel Fitzpatrick settled charges by the SEC, without admitting or denying the allegations, that they had fraudulently concealed the poor performance and looming financial impact of two student loan programs that ITT financially guaranteed.  Pursuant to the settlement, Modany and Fitzpatrick are barred from serving as officers and directors of public companies for five years, and are respectively ordered to pay penalties of $200,000 and $100,000, respectively. Modany and Fitzpatrick also agreed to be suspended from appearing and practicing before the SEC as accountants with permission to apply for reinstatement after five years.

Morgan Stanley Broker Wins Expungement After Firm Settled With Customer (BrokeAndBroker.com Blog) Among any group of litigators in any industry is an unwritten book about lawyers and law firms that we somewhat derogatorily refer to as "settlers." No . . . we're not talking about the Wild West and those who trekked by wagon train. We're talking about folks who cave in after giving you the impression that they will fight to the bitter end. If the settler is part of the Defense Bar, we often say that dealing with such a lawyer or law firm is akin to backing up a Brinks truck and loading it up. If we're referring to the Claimant Bar, we often jokingly characterize such settlers as lawyers or law firms who turn a $1 million case into a $10,000 settlement. In order to get good settlements for your clients, you need to develop the reputation of going to the mat and to verdict. You need to be known as someone who is willing to try a case to the proverbial bitter end. You don't need to win the case but you need to leave your opponent coughing up blood and with sore ribs so that your opponent is not all that crazy for a re-match. In a recent FINRA public customer arbitration, Morgan Stanley settled with the claimants. It may have been a cheap price to pay and a wonderful result for the brokerage firm. Then again, when you read the arbitrators' analysis of the customers' case, you sort of wonder whether Morgan Stanley just doesn't have the stomach for a game of high-stakes litigation poker. In the bare knuckle, no-holds-barred world of Wall Street, you sure as hell better earn the rep as a Street Fightin' Man!

SEC Charges Owings Group, a Convicted Felon and Others in $5 Million Offering Fraud (SEC Litigation Release No. 2418) In a Complaint filed in the United States District Court for the District of Maryland, the SEC charged The Owings Group LLC, three Owings-related entities and Mark Johnson with violating Section 10(b) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933 ("Securities Act") and charges Johnson and Owings Capital Funds with violating Section 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-8 thereunder. Also charged are Kevin Drost, Brian Koslow and David Waltzer with violating Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder and Section 17(a)(2) of the Securities Act and charges Drost, Koslow and Waltzer with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder and Section 17(a)(1) and (3) of the Securities Act. The complaint charges all defendants with violating the registration provisions of Sections 5(a) and (c) of the Securities Act and charges Johnson, Drost, Koslow and Waltzer with acting as unregistered broker-dealers in violation of Section 15(a) of the Exchange Act. The complaint also charges Johnson as a control person pursuant to Sections 20(a) of the Exchange Act and for committing violations by or through others pursuant to Section 20(b) of the Exchange Act for violations of Sections 15(a) and 10(b) of the Exchange Act and Rule 10b-5(b) thereunder and charges Johnson with aiding and abetting violations of Section 206(4) and Rule 206(4)-8 of the Advisers Act. The Complaint alleges that from 2013 until at least 2014, convicted felon Johnson orchestrated and operated a fraudulent investment scheme with the assistance of salesmen Drost, Koslow and Waltzer, in which investors were alleged defrauded into believing that Owings was successfully bringing companies public using a quick and efficient streamlined approach, called the Initial Registration Program ("IRP"). READ the FULL TEXT SEC Complaint 

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