The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
November 1, 2018
https://www.justice.gov/usao-ks/pr/felon-called-say-he-was-bind-now-he-s-charged-escaping-custody
Okay, sure, I'll admit it: It was the headline that got me By way of setting the scene, Joaquin Florez had been convicted of a drug charge, sentenced to federal prison in 2015, and, thereafter, was serving a term of home confinement. By way of spoiler alert, on October 31, 2018, Florez was indicted on a federal charge of escaping custody. As to how that latest charge came about, well, howsabout we let the DOJ Release pick it up from there:
On Sept. 13, 2018, the Bonner Springs Police Department notified the U.S. Probation Office that Florez was involved in a police chase in Bonner Springs. On the same day, Florez called the Grossman Residential Reentry Center in Leavenworth to say he was in a bind. He said he had purchased a vehicle and allowed a friend to drive it. He said the friend was involved in a chase with police. The director of the center ordered Florez to return to the center immediately. Florez did not report as required.
Romanian National Sentenced and Two Others Plead Guilty in Connection with ATM Skimming Scheme (DOJ Release)
https://www.justice.gov/usao-ma/pr/romanian-national-sentenced-and-two-others-plead-guilty-connection-atm-skimming-scheme
Over a period of 18 months, members of the so-called Hornea Crew, led by Constantin Denis Hornea and Ludemis Hornea, installed ATM skimming devices and made unauthorized withdrawals in seven states and transferred funds throughout the United States, Romania, and the People's Republic of China. Of the 15 defendants charged in the case, 7 have been convicted and sentenced, 3 have pleaded guilty and are awaiting sentencing, 3 are awaiting trial and 2 have not been arrested. In the United States District Court for the District of Massachusetts the matter is now entering into the pleading and sentencing phases:- Constantin Hornea was sentenced to 65 months in prison, three years of supervised release and ordered to pay $242,141 in restitution and a money judgment of $54,260.
- Ludemis Hornea was sentenced to 42 months in prison, three years of supervised release and ordered to pay $57,422 in restitution and a money judgment of $11,124.
- Nicusor Bonculescuwas pled guilty to conspiracy to conduct enterprise affairs through a pattern of racketeering activity, conspiracy to use counterfeit access devices and aggravated identity theft, and was sentenced to three years in prison and three years of supervised release; and ordered to pay restitution of $72,922.
- Suedin Chiciu and Florinel Vaduv pled guilty to conspiracy to conduct enterprise affairs through a pattern of racketeering activity and conspiracy to use counterfeit access devices. Also, Vaduva pled guilty to aggravated identity theft.
SEC Updates List of Firms Using Inaccurate Information to Solicit Investors / Updates Make It Easier for Retail Investors to Search Database (SEC Release 2018-247)
https://www.sec.gov/news/press-release/2018-247
The SEC updated its Public Alert: Unregistered Soliciting Entities (PAUSE) list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 16 soliciting entities, 4 impersonators of genuine firms, and 8 bogus regulators. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration.
Guest Blog: Here by Dragons by Aegis J. Frumento Esq (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4269/frumento-dragons/
In ancient maps, uncharted seas were drawn infested by dragons, sea-serpents and other monsters -- so you'd know if you went there, you'd gone too far. The past week has us feeling adrift in just such waters. I won't add to the voices decrying the careless alarmism that encourages violence. I don't disagree, but I've nothing to add. Neither do I dispute those who say that people, not guns, kill people. Guns make it a lot easier, but sure. And, yes, we will always be at risk of the random demented, though it seems blasphemous to treat a mass murderer as if he were an earthquake or meteor.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, LPL Financial LLC, submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of LPL Financial LLC, Respondent (FINRA AWC 2016050751901) http://www.finra.org/sites/default/files/LPL_AWC_103018.pdf
FINRA found that LPL failed to file or amend registered representatives' Forms U4 or U5 to disclose dozens of reportable customer complaints. FINRA determined that LPL had too narrowly interpreted the reporting requirement that a complaint contain "a claim for compensatory damages of $5,000 or more," which the member firm had incorrectly construed as not requiring it to report any complaint that did not expressly request compensation, even when the customer alleged a sales practice violation that caused him or her a loss of $5,000 or more, and the complaint, when viewed as a whole, made clear that the customer was seeking compensation. Further, as a result of LPL's unreasonably designed AML program, the firm failed to investigate numerous attempts to gain unauthorized access to electronic systems that should have resulted in the filing of over 400 Suspicious Activity Reports (SARs). In accordance with the terms of the AWC, FINRA imposed upon LPL a $2.75 million fine and the regulator noted that in determining the monetary sanction, FINRA considered LPL's extraordinary cooperation and undertaking to remedy its violations. Also, the AWC included an Undertaking that LPL would review 696 customer complaints from 2013 through November 2017 and submit a report to FINRA thereafter.
SEC Charges Beverage Company and Former CEO with Fraud (SEC Litigation Release No. 24329)
https://www.sec.gov/litigation/litreleases/2018/lr24329.htm / October 31, 2018
Securities and Exchange Commission v. Brian Weber and Bebida Beverage Co., No. 18 Civ. 05019 In a Complaint filed in the United States District Court for the Eastern District of New York, the SEC charged Bebida Beverage Co. and its former Chief Executive Officer/President Brian Weber with violating registration and antifraud provisions of the federal securities laws, including Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement plus prejudgment interest, and civil monetary penalties against the defendants, and, additionally, officer-and-director and penny stock bars against Weber. The Complain alleges that Weber created a fictitious convertible note and then, by deceiving Bebida's transfer agent, had the note converted into common shares that were sold to the public with the proceeds transferred back to Bebida. Allegedly, Weber used sham transactions to fraudulently inflate the number of outstanding Bebida shares, which he subsequently retired. It is further alleged that Weber issued false press releases touting the retirement of the shares as a buyback, which artificially inflating the company's share price. Finally, Weber allegedly sold other sham convertible debt and altered the checks that he had received as payment so that he could deposit them into bank accounts that he controlled. Without admitting or denying the SEC's allegations, Weber consented to the entry of a final judgment permanently enjoining him from similar violations in the future, ordering him to pay $208,000 in disgorgement, $23,436 in prejudgment interest, and $160,000 in civil penalty, and imposing a permanent officer-and-director bar and penny stock bar. READ the FULL TEXT Complaint
https://www.sec.gov/litigation/complaints/2018/comp24329.pdf
https://www.sec.gov/litigation/complaints/2018/comp24329.pdf
https://www.justice.gov/usao-ri/pr/equine-insurance-agent-charged-13-million-dollar-fraud-scheme
In a Complaint filed in the United States District Court for the District of Rhode Island, Randall N. Levesque, owner of Equine Insurance Services, LLC and Randall Levesque Agency, has been charged with wire fraud and aggravated identity theft. Allegedly, Levesque overbilled and double-billed customers when billing their credit cards for premiums due on policies, some of which the client did not request or did not agree to finance, at times forging the customers' signature. Further, he purportedly collected over $800,000 in premiums on insurance policies but did not forward the payments to the insurance companies. Finally, he allegedly obtained over $500,000 in financed premiums and received funds on behalf of customers without the customers' consent or knowledge, and submitted financing agreements to finance companies for fictitious customers, for whom there were no policies.
SEC Issues Statement on Certain Provisions of Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants (SEC Release 2018-249)
https://www.sec.gov/news/press-release/2018-249
The SEC issued a statement setting forth its position that for a limited time certain actions with respect to specific provisions of its Business Conduct Standards for Security-Based Swap (SBS) Dealers and Major Security-Based Swap Participants will not provide a basis for an enforcement action. Upon registration with the SEC entities that are also registered with the Commodity Futures Trading Commission (CFTC) will be required to comply with both the SECs Business Conduct Standards as well as analogous rules adopted by the Commodity Futures Trading Commission in 2012 applicable to swap dealers and major swap participants. In certain instances, the SEC's requirements, and the associated representations that would be required under standardized counter-party relationship documentation, diverge from those of the analogous CFTC requirements, which are reflected in existing standardized counteparty relationship documentation. The statement also addresses the SEC's position on the ability of parties to security-based swaps to rely on written representations previously provided in relation to swaps, also for a limited time period.
SEC Adopts Rules to Modernize Property Disclosures Required for Mining Registrants (SEC Release 2018-248)
https://www.sec.gov/news/press-release/2018-248
The SEC adopted amendments to modernize the property disclosure requirements for mining registrants, and related guidance, under the Securities Act of 1933 and the Securities Exchange Act of 1934. Under the final rules, a registrant with material mining operations must disclose specified information in its Securities Act and Exchange Act filings concerning its mineral resources, in addition to its mineral reserves. Current Commission rules and guidance permit the disclosure of non-reserve estimates only in limited circumstances. Requiring the disclosure of mineral resources in addition to mineral reserves will provide investors with important information concerning the registrant's operations and prospects.
SEC Proposes Disclosure Improvements for Variable Annuities and Variable Life Insurance Contracts (SEC Release 2018-246)
https://www.sec.gov/news/press-release/2018-246
The SEC voted to propose new Rule 498A under the Securities Act in order to improve disclosure for investors about variable annuities and variable life insurance contracts through the use of a summary prospectus to provide disclosures to investors. More‑detailed information about the contract would be available online, and an investor also could choose to have that information delivered in paper or electronic format at no charge. The public comment period will remain open through February 15, 2019. READ the FULL TEXT Proposed Rule https://www.sec.gov/rules/proposed/2018/33-10569.pdf As set forth in the "Summary" portion of the Proposed Rule:
The Securities and Exchange Commission is proposing rule and form amendments that are intended to help investors make informed investment decisions regarding variable annuity and variable life insurance contracts. The proposal would modernize disclosures by using a layered disclosure approach designed to provide investors with key information relating to the contract's terms, benefits, and risks in a concise and more reader-friendly presentation, with access to more detailed information available online and electronically or in paper format on request. The proposed new rule would permit a person to satisfy its prospectus delivery obligations under the Securities Act of 1933 for a variable annuity or variable life insurance contract by sending or giving a summary prospectus to investors and making the statutory prospectus available online. The proposed rule also would consider a person to have met its prospectus delivery obligations for any portfolio companies associated with a variable annuity or variable life insurance contract if the portfolio company prospectuses are posted online. In addition, we are proposing amendments to the registration forms for variable annuity and variable life insurance contracts to update and enhance the disclosures to investors in these contracts, and to implement the proposed summary prospectus framework. We are further proposing to require variable contracts to use the Inline eXtensible Business Reporting Language ("Inline XBRL") format for the submission of certain required disclosures in the variable contract statutory prospectus. We are also proposing certain technical and conforming amendments to our rules and forms, including amendments to rules relating to variable life insurance contracts, as well as rescission of certain related rules and forms. Lastly, we are seeking comments regarding parallel amendments to rules governing mutual fund summary prospectuses and registration forms applicable to other types of registered investment companies.