Securities Industry Commentator by Bill Singer Esq

These elderly homeowners were wooed into borrowing money through the special program by attractive sales pitches or a dire need for cash - or both. When they missed a paperwork deadline or fell behind on taxes or insurance, lenders moved swiftly to foreclose on the home. Those foreclosures wiped out hard-earned generational wealth built in the decades since the Fair Housing Act of 1968.

[F]rom 2015 through 2017, Guyon devised a scheme to defraud individual investors.  The scheme involved soliciting $1,956,400 from investors based on false and fraudulent representations about Guyon's education, employment history, and financial condition, false and fraudulent representations that the money would be invested in financial markets, and that he would not collect any commissions on the investments.  Once Guyon obtained the money, he spent it on personal expenses.  To cover up what he had done, Guyon provided investors with false and fraudulent monthly account statements showing positive returns on investments.

According to court records, Guyon's scheme to defraud investors (i) resulted in an actual loss of between $1,500,000 and $3,500,000; (ii) resulted in a substantial financial hardship to investor-victim R.F., who personally lost approximately $1,281,783 and (iii) involved the defendant acting as an organizer and leader of at least three other participants in the scheme.

[F]rom August 2008 to September 2015, Mata caused victims to invest in several of his businesses, including Secured Capital, Logos Real Estate and other ventures. Mata failed to disclose his disciplinary history to his victims, including his 2009 termination from Ameriprise Financial Services, Inc. for violating company policies, the indictment alleges. Mata also allegedly failed to disclose other disciplinary actions against him, including ones filed by the states of Nevada and California, and a one-year suspension and $10,000 fine imposed by the Financial Industry Regulatory Authority stemming as a result of his Ameriprise misconduct.

As part of the alleged scheme to defraud, Mata induced his victims to invest their money in Secured Capital, a real estate investment program that purportedly invested in "government-backed tax liens," "asset-backed deed certificates," and distressed commercial and residential properties. Mata guaranteed investors that Secured Capital's investment return generated annual rates of 5 percent to 10 percent, when in fact, investments in Secured Capital had significant loss risks and did not make a profit from 2011 onward, the indictment alleges.

Instead of properly investing his clients' money, Mata allegedly used Secured Capital investor funds to pay his personal expenses, including a $197,000 down payment on his personal residence, loans to himself and to other entities he created, and $370,000 that was transferred into his personal bank accounts. 

Mata also is charged with making false statements on bankruptcy court documents, and fraudulently concealing from the government and his creditors personal property, including a 2008 Mini Cooper and a 2001 Jeep. . . .

[I]n 2011 and 2012, two individuals (Individual A and Individual B) pleaded guilty in federal court in Brooklyn to securities fraud, conspiracy to commit securities fraud, and money laundering conspiracy.  At their sentencing proceedings in 2014, they were ordered to pay approximately $12.7 million in restitution to the victims of their securities fraud scheme.  Thereafter, in February 2017, Weissman advised Individual A that incriminating information about him would be provided to law enforcement, unless he paid $6 million to Individual B.  At his guilty plea proceeding today, Weissman admitted that he believed this payment would impede the enforcement of the restitution judgment against Individual B.  

in cases like this one, where a hearing had already taken place, there must be a new hearing before a different, properly appointed administrative law judge. Since the Chief Administrative Law Judge presided over the first hearing in this proceeding, Respondent asserts that she cannot participate in this matter further, even to sign subpoenas.

To avoid further controversy over Appointments Clause issues and in an abundance of caution, I am reissuing the subpoena under my signature as of today. I will consider Respondent's motion to quash in reference to the new subpoena. . . .

Suspension of SEI's business accepting deposits of stock certificates and liquidating previously deposited certificated securities until the firm implements measures to remedy the AML violations addressed in this AWC and the firm's chief compliance officer certifies, in writing to FINRA, that the firm has implemented an AML compliance program reasonably designed to detect and cause the reporting of suspicious activity . . .

From September 2013 to August 2015, SEI failed to establish and implement, as part of its anti-money laundering ("AML") compliance program, policies and procedures reasonably designed to detect and cause the reporting of suspicious activity in its primary business-accepting and liquidating customers' deposits of microcap securities. As a result, SEI violated FINRA Rules 2010 and 3310(a). 

During the same time period, SE1, acting through its manager of operations, affixed its chief executive officer's signature to representations required by SEI's clearing firm, thereby representing that the chief executive officer had reviewed customers' stock deposits, even though she had not actually done so. As a result, SEI violated FINRA Rule 2010. 

Finally, from November 2014 to August 2015, SEI charged more than 5% of the principal amount of more than 5,600 stock transactions, representing two-thirds of the firm's transactions during that period. SEI's charges for those transactions were unfair and unreasonable. In doing so, SEI failed to enforce its written supervisory procedures governing charges for transactions. As a result, SEI violated FINRA Rules 2010, 2121, and 3110, and NASD Rule 3010. . . .

[O]n December 17, 2018, SEI filed a Form BDW, indicating that it expected to cease operations in early 2019. While SEI's Form BDW was pending, FINRA cancelled the firm's membership on February 1, 2019, for failure to pay outstanding fees. During the period at issue below, SEI' s primary business -- accounting for more than 80% of the firm's revenue -- was accepting and liquidating customers' deposits of microcap securities. During that period, SEI had approximately twenty registered persons; currently, it has one. Although SEI no longer is a FINRA member, it remains subject to FINRA's jurisdiction pursuant to Article IV, Section 6 of FINRA's By-Laws of the Corporation.

From September 2013 to August 2015, Flemming failed to implement an AML compliance program reasonably designed to detect and cause the reporting of suspicious activity in SEI's primary business -- accepting and liquidating customers' deposits of microcap securities -- in violation of FINRA Rules 3310(a) and 2010. Additionally, Flemming allowed a subordinate to affix Flemming's signature to representations required by SEI's clearing firm, thereby representing that Flemming had reviewed documents supporting customers' stock deposits, even though she had not actually done so, in violation of FINRA Rule 2010.

• Securities Industry Commentator
• Bill Singer