Securities Industry Commentator by Bill Singer Esq

a. within 45 days of the date of this Election Notice, such person presents to the Corporate

Secretary of FINRA petitions in support of his or her nomination duly executed by 3

percent of the members entitled to vote for such nominee's election; and

b. the Corporate Secretary certifies that the petitions are duly executed by the executive

representatives of the requisite number of members entitled to vote for such

nominee's election, and the person satisfies the small firm size classification of the

NAC seat to be filled, based on such information provided by the person as is

reasonably necessary to make the certification.

1. From July through September 2017, Tomahawk Exploration LLC, an oil and gas exploration company, and its founder, David Laurance (collectively, "Respondents"), offered and sold digital assets in the form of tokens called "Tomahawkcoins," or "TOM," through an online initial coin offering ("ICO"). Respondents sought to raise $5 million through the ICO, purportedly to fund oil drilling in Kern County, California, having previously tried unsuccessfully to raise money for the project through private investments and the public capital markets. The Company's website and white paper touted the tokens' potential for significant long-term profits based on Tomahawk's anticipated oil production. Promotional materials represented that TOM investors could trade their tokens for potential profits on a token trading platform, and that they would have the option to convert their tokens into Tomahawk equity at a future date. Although Respondents failed to raise money through the ICO, Tomahawk issued approximately 80,000 TOM as part of a "Bounty Program" in exchange for online promotional and marketing services. 

2. Based on the facts and circumstances set forth below, TOM tokens are securities because they are investment contracts under SEC v. W.J. Howey Co., 328 U.S. 293 (1946), and its progeny, including the cases discussed by the Commission in its Report Of Investigation Pursuant To Section 21(a) Of The Securities Exchange Act Of 1934: The DAO (Exchange Act Rel. No. 81207) (July 25, 2017) (the "DAO Report"), and because they represent a transferable share or option on a security. Tomahawk's issuance of tokens under the Bounty Program constituted an offer and sale of securities because the Company provided TOM to investors in exchange for services designed to advance Tomahawk's economic interests and foster a trading market for its securities. Tomahawk and Laurance violated Sections 5(a) and 5(c) of the Securities Act by offering and selling TOM without having a registration statement filed or in effect with the Commission or qualifying for an exemption from registration with the Commission. 

3. Tomahawk and Laurance also violated the antifraud provisions of the federal securities laws with respect to the offering. Specifically, they falsely stated Tomahawk's prospects for success, using inflated projections of oil reserves and production that they claimed were "risk adjusted" when they were not. They also falsely represented that Tomahawk possessed leases for the project when it did not, and falsely stated that Laurance has a "flawless background" when he has a prior criminal conviction for conduct relating to securities offerings. 

1. This matter arises from Lockwood's failure to adopt and implement policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its assessment, oversight, and disclosure of the trading away practices of the third-party portfolio management firms in its wrap programs. More specifically, as described below, from at least 2008, and continuing on an ongoing basis to the present, Lockwood's policies and procedures failed to require that material information about trading away (i) would be obtained and considered by Lockwood prior to making the third-party portfolio management firms available to clients in its wrap programs and/or (ii) would be disclosed to clients directly or through their third-party registered investment advisers. 

2. Lockwood sponsored separately managed account wrap programs that it offered to third-party registered investment advisers and their clients. In the wrap programs, the investments were managed by third-party portfolio management firms pursuant to investment strategies selected by the clients in consultation with their investment advisers. Lockwood and the other participating firms were compensated for the advisory, brokerage, and custodial services that they provided by sharing an annual wrap fee based on a percentage of the assets under management. Certain expenses were not covered by the wrap fee, such as when a portfolio manager elected to direct the execution of a trade through a broker-dealer firm that was not participating in the wrap program. This practice was referred to as "trading away" or "stepout trading," and, in many cases, it resulted in transaction costs being borne by the wrap program client in addition to the annual wrap fee. Despite paying these costs, wrap program clients were not notified that particular trades were stepped-out nor, if applicable, how much step-outs cost on top of the wrap fee. 

3. Lockwood's policies and procedures were not reasonably designed to prevent violations of the Advisers Act with respect to trading away in two respects. First, Lockwood's policies and procedures did not require it to determine whether a portfolio manager had a history of trading away or to assess the likelihood that the portfolio manager would do so in Lockwood's wrap programs prior to making that manager available to clients in its wrap programs. Second, the policies and procedures did not require Lockwood to provide information about trading away to clients and their investment advisers once those portfolio managers were on-boarded into Lockwood's wrap programs, even though the policies and procedures did require Lockwood to select and contact, on a quarterly basis, a portion of the portfolio managers that had traded away that quarter and gather details about the trading, the applicable policies of the given manager, and the rationale for trading away. As a result, Lockwood failed to provide clients or their investment advisers with material information about trading away and the full extent of the costs of choosing certain portfolio managers in Lockwood's wrap programs. By contract, Lockwood had allocated to the clients' investment advisers the responsibility of evaluating the suitability of the portfolio managers for the individual clients, but Lockwood did not provide the advisers with enough 3 information to perform that evaluation. By failing to adopt and implement policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder, Lockwood violated Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

Luboff was the operator of "Triple Play Sales," a computer store located in Coral Springs, Florida.  As part of his operation of Triple Play Sales, Luboff purchased and sold computer products and earned commission on those transactions.  Court records show that on January 25, 2018, Luboff emailed a past business associate, identified in court documents as "S.F.," proposing a transaction to help Luboff finance 600 central processing units (CPUs).  S.F. is a business owner and resident of Cornelius, N.C. 

According to court records, Luboff falsely represented to the victim that if S.F. gave him $131,400 to help purchase the CPUs, Luboff would provide S.F. with a $20,000 profit within one week.  To further induce S.F. to give him the money, Luboff lied to the victim and said that he was going to invest $30,000 of his own money to complete the transaction.  The victim wired $131,400 to Triple Play Sales in accordance with Luboff's instructions. 

According to court records, contrary to what he told S.F., Luboff did not have a proposed transaction for CPUs lined up, and Luboff had no intention of using S.F.'s money to purchase CPUs. Rather, Luboff spent S.F.'s money on personal expenditures, such as to pay for car insurance and law care expenses, among other things.

When S.F. confronted Luboff about his failure to return S.F.'s principal and income from the transactions, Luboff told the victim a series of lies, including that federal law enforcement agents had frozen the money because a party to the purported transaction had business overseas.

• Securities Industry Commentator
• Bill Singer