The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
December 12, 2018
The Failure of Wall Street Compliance and Regulation: A Case In Point (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4325/finra-elderly-widow/
They will try to convince you that Wall Street has an effective two-tier system to protect investors. First, there's the in-house Compliance Staff. Second, there's the federal, state, and self regulators. If the first line of compliance defense fails, you have the Imperial Guard regulators held in reserve. It all sounds good. The problem is that it's all nonsense. It's not so much that the system doesn't work, as much as it is that the system is not designed to work but only to give so much of an appearance as necessary. Wall Street's brokerage firms underpay, understaff, and undercut their compliance departments. As far as compliance goes, it's pretty much viewed as window dressing. When it comes to Wall Street's regulators, well, recent history pretty much speaks volumes on that subject. All in all, Wall Street's approach and dedication to effective investor protection amounts to little more than reading toe tags at the morgue. More after-the-fact than preventative medicine. In a recent FINRA regulatory settlement, we see the futility of compliance and regulation at its worst. Where were Wall Street's cops during the years when this one investor was victimized? All the warning signs were there and mounting -- year after year, lost dollar after lost dollar. Did no one notice? Or did no one care?
Public Forum On Millennials And Investing: December 12, 2018 / FINRA Investor Education Foundation Hosts A Public Forum On Millennials And Investing With Remarks By U.S. Representatives Joyce Beatty And Steve Stivers http://www.finra.org/investors/public-forum-millennials-and-investing-december-12-2018
FINRA-Foundation-Forum-Millennials-121218-Speakers
Bill Singer's Comment: Oh how I hate -- and I mean H-A-T-E -- this crap and with a passion. FINRA is spending money to host a forum that has not one but, count 'em, two Co-Chairs from whatever the hell is the "Financial and Economic Literacy Caucus." Like, what the hell is a Caucus to begin with and why does it need Democratic Representative Joyce Beatty and Republican Representative Stivers as Co-Hosts? A single host would be more affordable, right? In addition to those two Congressional luminaries serving as Caucus Co-Hosts, FINRA's event also offers the dulcet tones of both FINRA Foundation President Gerri Walsh and FINRA Foundation Director of Research, Dr. Gary Mottola. All of which means we got a Foundation hosting a forum featuring remarks by Caucus Co-Chairs and speeches by the President and Director of the esteemed FINRA Foundation that's sponsoring the event.
What, you may ask is the topic of the FINRA event? Oh, you're gonna love this: It's a discussion of "national research findings regarding the financial behaviors and attitudes of millennials in the United States." Wow, can't wait to not attend that event. We're promised "remarks" by the two Congressional Caucus Co-Chairs (nice bit of alliteration!). In a dazzling double-barreled undertaking, both FINRA Investor Education President Walsh and Director Mottola will "debunk common assumptions about millennial investors explored in a study titled, "Uncertain Futures: 7 Myths About Millennials and Investing." The purported debunking will examine "pathways millennials follow to investing, their perceptions about financial professionals and their knowledge and interest related to selected investing innovations." Refreshments will be provided, which may be the main incentive for anyone to attend this debunking.
FINRA's event will be held in the impressive-sounding "U.S. Capitol Visitor Center, Congressional Auditorium & Atrium, CVC Room 220" from "9:00 A.M. - 10:00 A.M." Are they serious? Who the hell is going to get up early enough to attend this yawner at 9 am? Keep in mind that the whole thing is supposed to run only one hour, which isn't a helluva a lot of time to jam in four speakers and all seven of the myths about millennials and investing. I don't want to come off here as too skeptical but, you know, maybe you could cover three or four myths at most within an hour but seven? I don't think so. If the entire hour was solely dedicated to the seven-myths debunking, that would give you like 9 minutes per myth, which you might get in under the wire, but given that we got two Representatives headlining the event and they will each have their remarks to make, I doubt that there will be more than 40 minutes left to cover all 7 myths, which only gives you something like under 6 minute to debunk a given investing myth. Doesn't sound like there's a lot of substance on this FINRA event's bone.
Faced with the early-morning start, the two Co-Chairs, the two FINRA mythic speakers, and only one hour to get it all done, I'm not sure there's going to be a full house. Of course there will be those folks looking to get out of the cold and kill an hour, and, hey, FINRA's promotional materials promise free refreshments, which is much better than the deal at Starbuck's. Sadly, included in the likely small audience will be that guy. He's always at these events with free refreshments. He's the one with the pocket protector filled with six pens and two pencils, who is holding on for dear life to a massive redwell held together by several rubber bands, and he raises a hand to ask a question: Why does FIRNA (no, that's not a typo; that guy rarely get acronyms right) allows the Deep State to protect Bernard Madoff and the Illuminati? Isn't FIRNA a secret organ of the Trilateral Commission and part of a plan to destabilize the American financial system? Isn't it true that the term Millennials is the product of a mind-altering-cortex infusion program funded by the Rockefellers, the Rothschilds, and the Romanovs?
I'm sorry but FINRA has better things to do than spending money on these asinine events. Day in and day out we got vulnerable investors getting ripped off by predatory fraudsters and FINRA should use its time and money to hire more regulatory staff. As I have long argued, FINRA should immediately fund an Antifraud Fund from which victimized investors would be paid compensatory damages when faced with collecting from insolvent FINRA broker-dealers and their associated persons. Frankly, that strikes me as a far better use of FINRA's money than a one-hour event designed to debunk myths about millennials' investing habits.
https://www.sec.gov/news/press-release/2018-277
Without admitting or denying the findings in the SEC's Order, The Hain Celestial Group settled charges that it had violated books and records and accounting controls provisions of the federal securities laws, and the firm was ordered to cease and desist from further violations.Based upon the company's alleged "extensive cooperation with the SEC's investigation, which included self-reporting and remediation efforts," the SEC did not impose a monetary penalty on the company.READ the SEC Order https://www.sec.gov/litigation/admin/2018/34-84781.pdf The SEC Order alleges in part that:
[B]etween 2014 and 2016, sales personnel for The Hain Celestial Group, Inc. offered the company's two largest distributors incentives at the end of fiscal quarters to encourage the purchase of sufficient inventory for Hain to meet quarterly internal sales targets. The incentives offered by Hain included rights of return for products that spoiled or expired before they were sold to retailers, as well as cash incentives of up to $500,000, substantial discounts, and extended payment terms. According to the SEC's order, some of the incentives were agreed to orally and not documented, and others were documented only in email exchanges with the distributors. The SEC's order found that the company lacked sufficient policies and procedures to ensure the incentives were properly documented and accounted for and that Hain's finance department was not aware of the quarterly incentive practices until May 2016.After its finance department discovered the existence of the sales incentive practices, Hain undertook an internal investigation, and in August 2016, the company self-reported to the SEC its discovery of the sales incentives and announced it was delaying its financial reporting for 2016. Ten months later, Hain reported that financial restatements were not required and simultaneously disclosed material weaknesses in its internal control of financial reporting. As reflected the SEC's order, Hain has since made organizational changes, including the retention of staff in compliance positions, and has implemented changes to its revenue recognition practices.
Testimony on "Oversight of the U.S. Securities and Exchange Commission" (SEC Chair Jay Clayton)https://www.sec.gov/news/testimony/testimony-oversight-us-securities-and-exchange-commission-0
A wide-ranging and provocative speech to the U.S. Senate Committee on Banking, Housing, and Urban Affairs by SEC Chair Clayton in which he discusses:
(1) the regulatory and policy agenda; (2) enforcement and compliance; (3) enterprise risk and cybersecurity; (4) increasing our engagement with investors and other market participants; and (5) emerging market risks and trends. It also discusses a number of forward-looking initiatives that we are pursuing as our 2019 near-term agenda is now publicly available. Continuing with the themes of transparency, accountability and clarity of mission, the 2019 near-term agenda focuses on the initiatives we reasonably expect to complete over the next 12 months. I welcome feedback from all interested parties on areas in need of focus and how we can best allocate our resources.
https://www.justice.gov/usao-mn/pr/former-oil-company-president-sentenced-12-years-prison-stock-manipulation-scheme
Following an 11-day jury trial in the United States District Court for the District of Minnesota Ryan Randall Gilvertson was convicted on 14 counts of wire fraud, 6 counts of securiteis fraud, and one count of conspiracy to commit securities fraud; and sentenced to 144 months in prison plus 2 years supervised release and ordered to pay a $2 million fine and $15,135,360 in restitution. Co-Defendant Douglas Vaughn Hoskins was similarly convicted and awaiting sentencing. In 2008, Gilbertson and a business partner founded Dakota Plains, Inc, which owned and operated a transloading facility. The two founders concealed their involvement in the company by installing their fathers as the company's executives and two-person board of directors. Initially, Gilbertson caused Dakota Plains to issue $9 million in promissory notes paying 12% interest with a provision to pay a bonus related to the average stock trading price during the first 20 days of future public trading to himself and other corporate insiders. Thereafter, Gilbertson took Dakota Plains public via a reverse merger with Malibu Club Tan, a publicly traded shell company that operated a single defunct tanning salon. A secret condition of the reverse merger was that Defendant Douglas Hoskins, Gilbertson's friend and polo coach, would be able to purchase the majority of the "float" of freely trading shares. Hoskins was deeply in debt and owed money to the IRS and other creditors, and Gilbertson gave his friend $30,000 in order to purchase 50,000 shares of Dakota Plains stock at a price of $0.50 per share on March 23, 2012, the morning of the reverse merger -- that same day at Gilbertson's direction, Hoskins began selling his shares at the fraudulently inflated price of $12 per share.Throughout the 20-day period following the reverse merger, Gilbertson with the help of Hoskins and others, manipulated the price of Dakota Plains stock to increase the average trading price to $11.30 per share, thus triggering a $32.8 million bonus payment to Gilbertson and the other noteholders. Ultimately, Gilbertson made millions as a result of his stock manipulation scheme; and Hoskins made over $125,000, much of which he used to purchase an Argentine polo pony. When the Securities and Exchange Commission interviewed Hoskins, he repeatedly lied under oath and claimed that he did not discuss the stock trades with any other individuals.