The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
September 26, 2018
SEC Charges Ohio Broker with Defrauding Senior Customers (SEC Release No. 24287)
https://www.sec.gov/litigation/litreleases/2018/lr24287.htm
https://www.sec.gov/litigation/litreleases/2018/lr24287.htm
In a Complaint filed in the United States District Court for the Southern District of Ohio, the SEC charges John Greg Schmidt with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a judgment ordering Schmidt to disgorge his ill-gotten gains with prejudgment interest, and to pay civil penalties.The Complaint alleges that Schmidt, who was associated with an SEC-registered broker dealer, made unauthorized sales of securities of at least seven of his customers and unauthorized transfers of over $1 million in proceeds to 10 other customers to cover shortfalls in their accounts. Allegedly, Schmidt received over $230,000 in brokerage commissions from these customers.READ the FULL TEXT Complaint
https://www.sec.gov/litigation/complaints/2018/comp24287.pdf As set forth in the Complaint:
https://www.sec.gov/litigation/complaints/2018/comp24287.pdf As set forth in the Complaint:
7. Schmidt's customer-victims were particularly vulnerable. Most were elderly retirees with little to no financial expertise. Several of Schmidt's victims were suffering from Alzheimer's disease or other forms of dementia. At least five of Schmidt's victims passed away during the course of his fraud.
Stockbroker Pays Undisclosed Customer Settlement But It All Explodes Anyway
(BrokeAndBroker.com Blog)
(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4196/finra-settling-away/
The path of least resistance does not always take those who journey on it along a straight and narrow route. Sometimes, what's quickest and most expedient is wrong. In a recent FINRA regulatory settlement, we come across a stockbroker who seems to have found it easier to simply write out a check for his customers' alleged losses. But that it was all that simple. It ain't. In the end, after the check was cashed and the money spent, the customers still sued and the stockbroker was fined and suspended by FINRA.
https://www.justice.gov/usao-sdfl/pr/former-chief-financial-officer-bankrate-inc-sentenced-10-years-prison-orchestrating
Former Bankrate Inc. Chief Financial Officer Edward J. DiMaria pled guilty in the United States District Court for the Southern District of Florida to one count each of conspiracy to making false statements to a public company's accountants; falsifying a public company's books, records and accounts; securities fraud; and making materially false statements to the Securities and Exchange Commission. Between 2010 and 2014, DiMaria directed and conspired to inflate Bankrate's earnings through so-called "cookie jar" or "cushion" accounting, whereby millions of dollars in unsupported expense accruals were left on Bankrate's books and then selectively reversed in later quarters. DiMaria and other Bankrate employees misrepresented as "deal costs" certain company expenses, and, thereafter, made materially false statements to Bankrate's independent auditors to conceal the improper accounting entries, all of which caused over $25 million in shareholder losses. DiMaria was sentenced to 10 years in prison plus three years of supervised release and ordered to pay $21,234,214 restitution. Bankrate's former Vice President of Finance Hyunjin Lerner previously pled guilty for his role in the conspiracy and was sentenced to 60 months in prison. READ the FULL TEXT:
DiMaria Indictment https://www.justice.gov/opa/press-release/file/1019726/download
Lerner Indictment https://www.justice.gov/criminal-vns/file/953841/download
Lerner Indictment https://www.justice.gov/criminal-vns/file/953841/download
SG Americas Securities Charged for Improper Handling of ADRs (SEC Release 2018-211)
https://www.sec.gov/news/press-release/2018-211
https://www.sec.gov/news/press-release/2018-211
Without admitting or denying the SEC's findings, SG Americas LLC agreed to return over $480,000 of alleged ill-gotten gains plus $82,000 in prejudgment interest and a $250,000 penalty in settlement of an SEC Order that found SG Americas had violated Section 17(a)(3) of the Securities Act of 1933 and failed reasonably to supervise its securities lending desk personnel. The Order found that the misconduct of predecessor entity Newedge USA LLC allowed thousands of pre-released ADRs to be issued without the necessary coverage of underlying ordinary shares.READ the FULL TEXT SEC Order https://www.sec.gov/litigation/admin/2018/33-10560.pdf
SEC's plan to open up private markets will let loose the wolves on regular investors (CNBC.com )
https://www.cnbc.com/2018/09/25/greifeld-secs-plan-to-open-up-private-markets-will-let-loose-wolves.html
https://www.cnbc.com/2018/09/25/greifeld-secs-plan-to-open-up-private-markets-will-let-loose-wolves.html
SEC Chairman Jay Clayton is proposing that the SEC consider modernizing the definition of an accredited investor, which currently includes having a million dollar net worth. In response, former NASDAQ Chair Robert Greifeld says private markets may offer more pain than gain for Main Street as about 60 percent of start-ups fail. Greifeld warns that investing in the "hope stocks" of promising but unproven (and often unprofitable) companies is not a game to be played with a retirement account. Further, he warns that a good regulatory environment should encourage our animal spirits, not let loose the wolves. READ the FULL TEXT CNBC Article https://www.cnbc.com/2018/09/25/greifeld-secs-plan-to-open-up-private-markets-will-let-loose-wolves.html
SEC Charges Former CEO of Chilean-Based Chemical and Mining Company With FCPA Violations (SEC Release 2018-212)
https://www.sec.gov/news/press-release/2018-212
https://www.sec.gov/news/press-release/2018-212
Without admitting or denying the findings in the SEC's Order, former Chief Executive Officer of Chilean-based chemical and mining company Sociedad Quimica y Minera de Chile, S.A. (SQM) Patricio Contesse Gonzalez agreed to pay $125,000 to resolve charges that he violated the Foreign Corrupt Practices Act (FCPA). The SEC alleged that over seven years, Contesse directed and authorized some $15 million improper payments to Chilean political figures and others connected to them, and engineered such payments via fake documentation submitted to SQM by ondividuals/entities posing as legitimate vendors. The SEC alleged that Contesse caused the related false accounting entries in SQM's books and records and also lied to SQM's independent auditor and signed false certifications in SQM's filings. In 2017, SQM paid $30 million to settle parallel civil and criminal charges against the company. READ the FULL TEXT Order https://www.sec.gov/litigation/admin/2018/34-84280.pdf Bill Singer's Comment: As troubling as the alleged FCPA violations may be, what truly annoyed the hell out of me with this case is that no matter how many times I entered the headline into my Content Management System in preparation for publication, "SEC Charges Former CEO of Chilean-Based . . ." kept getting autocorrected to "SEC Charges Former CEO of Chilean-Bass . . ." So, in the event this gets posted as a fish violation rather than a chemical/mining violation, please don't write me because I've gone in and manually corrected this piscatorial or pescatorial misconduct far too many times and, frankly, I no longer give a crap whether the bogus payments were for payoffs to politicians or fishermen. Anyone got an extra wedge of lemon?
Fairfield County Cardiologist Sentenced to Prison for Insider Trading (DOJ Release)
https://www.justice.gov/usao-ct/pr/fairfield-county-cardiologist-sentenced-prison-insider-trading
https://www.justice.gov/usao-ct/pr/fairfield-county-cardiologist-sentenced-prison-insider-trading
A federal jury in the United States District Court for the District of Connecticut found cardiologist Edward J. Kosinski guilty of two counts of securities fraud-insider trading. Kosinski had entered into a Clinical Study and Research Agreement as a principal investigator with an authorized agent of Regado Biosciences, Inc. (formerly traded under the NASDAQ symbol "RGDO.") In May 2014, Kosinski owned 40,000 shares of Regado common stock, and on June 29, 2014, he and other investigators received an email from the clinical trial team stating that there had been several allergic reactions during the trials, prompting a hold on the acceptance of new subjects and a review by the Data and Safety Monitoring Board ("DSMB"). On June 30, 2014, while in possession of the non-public information about the allergic reaction and trials' hold, Kosinski sold his 40,000 RGDO shares at $6.59 to $7.00 per share. After the markets' closed on July 2, 2014, RGDO made public the information related in the email and the share price fell $3.95 from the day's previous closing price, to close at $2.81. By selling on the basis of inside information, Kosinski avoided about a $160,000 loss. Additionally, after learning via email from the clinical trial team on July 29, 2014, of a death related to the trial, Kosinski purchased 50 Regado $2.50 Puts. When RGDO announced the permanent halt to further trials before the markets opened on August 25, 2014, the share price fell about 60%, at which time Kosinski exercised his Puts, purchased 5,000 shares of RGDO at about $1.13 a share, resulting in a $3,000 profit. Kosinski was sentenced to six months of imprisonment, two years of supervised release and a $500,000 fine for insider trading. Kosinski was charged by the SEC in a related civil matter.
New York Man Sentenced to 46 Months in Prison For Role in Identity Theft and Bank Fraud Scheme / Defendant Traveled Across the Country to Carry Out the Scam (DOJ Release)
https://www.justice.gov/usao-dc/pr/new-york-man-sentenced-46-months-prison-role-identity-theft-and-bank-fraud-scheme
Krishna Jannor-John Marsh pled guilty in the United States District Court for the District of Columbia, to a charge of conspiracy to commit bank fraud. Federal prosecutors alleged that Marsh conspired with others to access bank-account holders' personal identifying information and used the identification to open accounts at other financial institutions. The conspirators opened fictitious accounts at other financial institutions, and wired funds and deposited checks from the compromised bank accounts into the fictitious accounts. Marsh was sentenced to 46 months in prison plus three years of supervised release and ordered to pay $338,100 in restitution to three banks, as well as a forfeiture money judgment of $50,000.