The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
April 30, 2019
FINRA Bars Former Merrill Lynch and Wells Fargo Rep.
FINRA Department of Enforcement, Complainant, vs Michael John Ahearn, Respondent (Order Accepting Offer of Settlement, FINRA Office of Hearing Officers, 22016051389101, April 29 2019) (the "FINRA Settlement Order").
http://www.finra.org/sites/default/files/fda_documents/2016051389101
%20Michael%20John%20Ahearn%20CRD%202661001
%20Order%20Accepting%20Office%20sl.pdf
In response to the filing of a Complaint on September 12, 2018, by the Financial Industry Regulatory Authority's ("FINRA's") Department of Enforcement, Respondent Michael John Ahearn submitted an Offer of Settlement dated April 22, 2019, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Ahearn consented to the entry of findings and violations and to the imposition of the sanctions.
FINRA Department of Enforcement, Complainant, vs Michael John Ahearn, Respondent (Order Accepting Offer of Settlement, FINRA Office of Hearing Officers, 22016051389101, April 29 2019) (the "FINRA Settlement Order").
http://www.finra.org/sites/default/files/fda_documents/2016051389101
%20Michael%20John%20Ahearn%20CRD%202661001
%20Order%20Accepting%20Office%20sl.pdf
In response to the filing of a Complaint on September 12, 2018, by the Financial Industry Regulatory Authority's ("FINRA's") Department of Enforcement, Respondent Michael John Ahearn submitted an Offer of Settlement dated April 22, 2019, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Ahearn consented to the entry of findings and violations and to the imposition of the sanctions.
The FINRA Settlement Order asserts that Respondent Ahearn was first registered in 1996 and that by 2004, he was registered with FINRA member firm Wells Fargo Clearing Services LLC, and by 2011 with FINRA member firm Merrill Lynch, Pierce, Fenner & Smith Incorporated, where he remained until his alleged September 16, 2016 discharge (effective August 26, 2016) for "[c]onduct inconsistent with regulatory requirements related to an account listing a registered representative as trustee and failure to be forthcoming during the review of the matter." In accordance with the terms of the FINRA Settlement Order, Ahearn was barred from association with any FINRA member in any capacity. As set forth in the "Summary" section of the FINRA Settlement Order:
1. Respondent Michael John Ahearn provided false information in a written response to a FINRA Rule 8210 request and false testimony during an on-the-record-interview, in violation of FINRA Rules 8210 and 2010.2. FINRA staff made the requests for information and testimony in connection with an investigation into Ahearn and another registered representative, GW, regarding allegations that GW failed to disclose to his member firm that he was the trustee of an individual named MBM's assets and that he had been named as the executor of her estate. MBM inherited a large sum of money when her mother passed away.3. On multiple account-opening documents for MBM's trust, Ahearn represented that GW, the trustee for MBM's trust and the authorized person on the accounts, was not employed by a FINRA member or other financial services company. When FINRA sent Ahearn a Rule 8210 request asking about these account-opening documents, he stated that GW had told him he was unemployed and had never told him that he was a registered representative at another broker-dealer. Ahearn repeated this story in a later on-the-record interview when he testified, under oath, that GW had told him he was unemployed and that Ahearn did not learn that GW worked for another broker-dealer until after opening MBM's accounts.4. As Ahearn has since admitted, these statements were false. Ahearn knew at the time he opened MBM's accounts that GW was employed by another broker-dealer and he misled FINRA about that fact. As a result, Ahearn violated FINRA Rules 8210 and 2010.
Bill Singer's Comment: Compliments to FINRA on a superbly drafted Settlement Order, which is replete with content and context, and flows in a very compelling manner. FINRA's narrative presents the perplexing unraveling of Ahearn's career in a manner that comes off as bewildering bit of self-strangulation. So many lies and apparently with far too little thought about how easy it would be for a compliance department or industry regulatory to punch holes through the fabrications. I urge all industry professionals to read this settlement.
https://www.sec.gov/news/press-release/2019-62
In a Complaint filed in the United States District Court for the Southern District of New York, https://www.sec.gov/litigation/complaints/2019/comp-pr2019-62.pdf, the SEC charged
Chief Compliance Officer James Siniscalchi with violating the antifraud provisions of the federal securities laws and seeks a permanent injunction from future violations, disgorgement of allegedly ill-gotten gains, with interest, and financial penalties. A parallel criminal action was filed against Siniscalchi and his cousin Joseph Meli. As set forth in part in the SEC Release:
[S]iniscalchi and his business partners rebranded businesses formerly run by his cousin, Joseph Meli, who ultimately settled to SEC fraud charges and pled guilty to securities fraud in a parallel criminal action, and that this rebranding was done with Meli's knowledge and help. In the wake of Meli's arrest, Siniscalchi and his business partners allegedly raised approximately $2.7 million net from investors. The investors were allegedly promised their money would be used only to purchase tickets to events including the Broadway shows Harry Potter and the Cursed Child, Hello Dolly, and Bruce Springsteen on Broadway, and a professional boxing match between Floyd Mayweather Jr. and Conor McGregor. In actuality, Siniscalchi allegedly misused investor funds to benefit himself and Meli and his family. The SEC alleges that Siniscalchi took steps to conceal from investors Meli's involvement given the widely publicized civil and criminal cases that were then pending against Meli. In efforts to hide Meli's role, Siniscalchi allegedly instructed staff not to include Meli on emails to investors, and referred to Meli as "Keyser Soze," in reference to a fictional movie character from the movie The Usual Suspects who secretly operated as a crime kingpin.
SEC Obtains Asset Freeze in Connection with Alleged Insider Trading (SEC Release)
https://www.sec.gov/litigation/litreleases/2019/lr24462.htm
https://www.sec.gov/litigation/litreleases/2019/lr24462.htm
In a Complaint filed in the United States District Court for the Southern District of New York, https://www.sec.gov/litigation/complaints/2019/comp24462.pdf, the SEC charged unknown traders with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Exchange Act Rule 10b-5. The SEC seeks a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest, imposing civil penalties, and permanently enjoining them from future violations.The Court entered an emergency Order freezing assets or proceeds in accounts resulting from the suspicious trading, and requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading. As set forth in part in the SEC Release, the SEC cited a series of transactions that took place:
prior to the announcement that Chevron intends to acquire all of Anadarko's outstanding shares for $65 per share in cash and stock, representing a 38 percent premium over Anadarko's pre-announcement closing price. The traders, who are currently unknown, allegedly used foreign brokerage accounts in the United Kingdom and Cyprus to purchase out-of-the-money call options through U.S.-based brokerage firms and on U.S.-based exchanges in the days leading up to the announcement. Following the acquisition announcement, Anadarko's shares rose significantly and the brokerage account customers profited by either selling many of the option contracts at a profit or exercising the options to acquire large positions of Anadarko stock at steep discounts.The court's order freezes the proceeds related to the foreign accounts' trading.
FINRA Warns Of Imposter Brokerage Websites (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4566/FINRA-Website-Spoof/
A FINRA Information Notice warns about increasing website attacks targeting the FINRA member community. Although not a new threat, efforts to hijack and compromise the sites of financial firms is a serious problem that has not shown any signs of abatement. The Notice offers some excellent steps that you can take to protect your online content.
Former District of Columbia Attorney Found Guilty of $2 Million Investment Fraud Scheme (DOJ Release)
https://www.justice.gov/opa/pr/former-district-columbia-attorney-found-guilty-2-million-investment-fraud-scheme
Former Baylor & Jackson PLLC law partner Brynee Baylor was convicted after a jury trial in the United States District Court for the District of Columbia on one count of conspiracy to commit securities fraud, one count of securities fraud, and five counts of first-degree fraud. As set forth in part in the DOJ Release:
[I]n 2010 and 2011, Baylor caused more than $2 million of investor funds to pass through the Baylor & Jackson lawyer trust account. More than half of the investor funds were used for the benefit of Baylor, the Pennsylvania man, the Milan Group, and Baylor & Jackson. Baylor falsely assured investors that the purported trading program was legitimate and had little if any risk. Baylor also falsely told investors that she had personally observed investors successfully complete transactions with the Milan Group. In reality, the Milan Group did not complete any such transactions and did not return any of the investors' money.