The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
September 3, 2019
Rocky Enters Texas Ring Over Fee-For-Advice Dispute (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4785/finra-arbitration-rocky/
In Rocky XXIV, we come across a fighter who transitioned his fee-for-advice business to a new FINRA member firm after obtaining assurances that the firm would expeditiously arrange to handle his model. The firm paid a huge purse in the form of a six-figure promissory note. The fight didn't go the distance. Rocky refused to answer the bell for the third round claiming that his opponent was trying to bite off his ear -- or, in somewhat more mundane terms -- that the new firm wasn't timely delivering on its promises to provide support services. The promoter wants his purse back. Rocky calls for Adrian, calls for Creed, calls for Rambo (he was confusing movies), and then refuses to return the purse. Angered, the firm marches into a Texas state court. Rocky, still recovering from his shortened fight, climbs back into the ring and demands that any new bout be held before a FINRA arbitration panel. The bell rings for Round One . . .
FINRA Suspends and Fines Rep Who Forged Electronic Signatures on 26 New Account Docs. In the Matter of Vitthal Mathurbmas Patel, Respondent (FINRA AWC 2018059723101)
https://www.finra.org/sites/default/files/fda_documents/2018059723101
%20Vitthal%20Mathurbmas%20Patel%20CRD%201775477%20AWC%20va.pdf
%20Vitthal%20Mathurbmas%20Patel%20CRD%201775477%20AWC%20va.pdf
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,Vitthal Mathurbmas Patel submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. FINRA deemed that Patel had violated FINRA Rule 2010, and, in accordance with the terms of the AWC, FINRA imposed upon Vitthal Mathurbmas Patel a six-month suspension from association with any FINRA member in any capacity and $5,000 fine. As set forth in part in the AWC, [Ed: footnotes omitted]:
In early 2018, the Firm notified Patel that certain customer accounts that Patel managed would be replaced by another type of managed account. The Firm further advised Patel that customers were required to sign the new account opening forms for these accounts. From January to April 2018, Patel forged electronic signatures of customers on 26 new managed account documents by forging the customer's name electronically on the forms and electronically signing applications in place of the customer. One customer did not consent to the change. In addition, Patel forged handwritten signatures of customers on four other account-related documents, including a change of address form and a 529 college savings plan transfer form, and two beneficiary change forms by cutting and pasting photocopied customer signatures. The Firm requi-ed Patel to obtain original customer signatures in order to confirm that the customer provided written permission and authority for the change. Patel submitted the forged documents to the Firm for processing as if he had obtained the actual signatures from the customers. Thirty customers of his FINRA regulated broker-dealer employer were impacted.
https://www.justice.gov/usao-ndoh/pr/lorain-man-indicted-accessing-his-employer-s-computer-system-after-learning-he-would-be
In an Indictment filed in the United States District Court for the Northern District of Ohio, Austyn Keaton was charged with one count of damaging protected computers. As set forth in part in the DOJ Release:
Keaton was the sole information technology employee for a company located in Avon Lake. Keaton gained access to emails of the company's finance director and other employees. He learned the company planned to hire an outside vendor to take over IT operations from Keaton.Keaton was scheduled to meet with the vendor on February 25, 2019, in which the vendor was to ask Keaton to transfer access to the company's IT systems.On the same day, Keaton accessed the finance director's email, in which he learned the company planned to offer Keaton a severance package and terminate his employment.Keaton then took steps to lock the company's employees out of their email, take its web site offline, block the company's employees from accessing the company's customer relationship management system, and other unauthorized actions.
SEC Charges Two New Defendants in Fraudulent Microcap Manipulation Scheme Orchestrated Through International Accounts (SEC Release)
https://www.sec.gov/litigation/litreleases/2019/lr24583.htm
In a Complaint filed in the United States District Court for the District of Massachusetts https://www.sec.gov/litigation/complaints/2019/comp24583.pdf, the SEC charged Morrie Tobin, Milan Patel, Matthew Ledvina, Daniel Lacher, Brian Quinn, and David Skriloff (Chief Executive Officer of Environmental Packaging Technologies Holdings, Inc.) with violating various federal securities laws, including the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) thereunder. Also, Tobin, Patel, Ledvina, Lacher, and Quinn are charged with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. Further, Skriloff is charged with violating Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, aiding and abetting the other defendants' violations of Section 10(b) of the Exchange Act and Sections 17(a)(1) and (3) of the Securities Act, and aiding and abetting Environmental Packaging's violation of Section 17(a)(2) of the Securities Act. The SEC seeks a permanent injunction against future violations, disgorgement of allegedly ill-gotten gains plus prejudgment interest, penny stock bars, and monetary penalties; and, an Order barring Skriloff from serving as an officer and director of a public company. As set forth in part in the SEC Release:
On October 2, 2018, the SEC filed an emergency action and obtained an asset freeze against Roger Knox and Wintercap SA, charging them with a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies. On November 28, 2018, the SEC charged Morrie Tobin, Milan Patel, Matthew Ledvina, and Daniel Lacher, with scheming to hide Tobin's ownership and control over Environmental Packaging and CURE Pharmaceutical Holding Corp. by using offshore entitites to hold his stock and by establishing accounts to sell that stock at Wintercap.Acording [sic] to the SEC's amended complaint, Quinn helped facilitate a reverse merger between a public shell company secretly controlled by Tobin and a private-bulk packaging company for which Skriloff served as CEO. Skriloff, who continued as the CEO of the combined entity, Environmental Packaging, allegedly raised money from investors, which the defendants used to pay a stock promoter to tout the stock of Environmental Packaging, while creating the impression that the promoter's recommendation came from a neutral third party. Skriloff also allegedly attempted to disguise the payment to the stock promoter as part of a purported consulting agreement. The amended complaint further alleges that, during the promotional campaign, the price of Environmental Packaging shares more than doubled and Tobin profited from the higher share price. According to the amended complaint, Skriloff, as the CEO of Environmental Packaging, also made misstatements in public reports filed with the SEC about the reverse merger and the company's connection to the promotional campaign.The amended complaint also alleges that after the SEC halted trading in the securities of Environmental Packaging on June 27, 2017, the defendants took steps to obstruct the SEC's investigation - and conceal their own involvement in the matter - by arranging to change the names listed on Wintercap account records.