Securities Industry Commentator by Bill Singer Esq

Since at least 2012, a Brazilian company (the "Client") held an account at a financial institution headquartered in Manhattan (the "Firm").   Beginning in or about June 2014, ELIAS was in correspondence with a Senior Vice President at the Firm (the "Firm Employee") regarding the Client's account.  The Firm Employee then began receiving emails purportedly from an employee of the Client (the "Client Employee") instructing the Firm Employee to transfer the Client's money to a bank account in Luxembourg (the "Luxembourg Account") that appeared to be in the name of the Client.  Those emails were later determined to have been sent from an email address created the same day that was never used by the Client Employee and contained bogus wire instructions with the forged signature of the Client Employee.  As a result of the false documentation provided to the Firm Employee, on July 15, 2014, the Firm transferred approximately $752,000 from the Client's account at the Firm to the Luxembourg Account (the "Fraudulent Transfer"), believing it to be a legitimate transfer requested by the Client.

In actuality, the Client did not authorize the Fraudulent Transfer, did not have any bank or brokerage accounts in Luxembourg, and did not send the emails to the Firm Employee requesting the transfer.  Instead, the Luxembourg Account that received the Fraudulent Transfer was beneficially owned by ELIAS and opened in the name of a company formed in Panama the week prior to the Fraudulent Transfer.  The Luxembourg Account was held in the name of a company containing the name of the Client in order to create the false impression that the Client's funds were being transferred to an account beneficially owned by the Client when in fact such account was beneficially owned by ELIAS. . . .

Between January 2014 and December 2015, Bennett exercised discretion in the accounts of four customers, one of whom was a senior investor, by placing approximately 75 total trades in those accounts. Bennett did not obtain express authorization from those customers for those trades prior to placing them, did not have written authorization from the customers to exercise discretionary authority in those accounts, and neither sought nor obtained from Hilliard Lyons prior written acceptance of the accounts as discretionary. 

By virtue of the foregoing, Bennett violated NASD Rule 2510(b) and FINRA Rule 2010.  

While helping to raise nearly $5 million for a purported investment, Respondent Joseph Vitale told investors that he received no commissions, when in fact roughly a third of their funds were siphoned to his personal benefit. This initial decision bars Vitale from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in an offering of penny stock.

Claimant was not involved in the alleged deposit of the Customer's check into a personal account. The Arbitrator noted that Claimant's Exhibits 3, 4 and 5 conclusively demonstrated that Claimant did not deposit the check into a personal account. Exhibit 5 contains a letter signed by the Customer, which includes the statements, "This was a clerical error involving the cashier and home office personnel, [Respondent] placed the incorrect account number on my account" and Claimant "did not misdirect or misappropriate these funds." 

During the expungement hearing, Claimant provided testimony, which described in detail, the internal control procedures with respect to receiving customer deposits at Respondent's office, where he was employed. Claimant testified that, at no time did he have access to incoming deposits from customers. In addition, Claimant did not have supervisory control over the employees responsible for the

receipt of incoming deposits.     

• Securities Industry Commentator
• Bill Singer