The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
November 8, 2019
featured in today's Securities Industry Commentator:
Tower Research Capital Not Such a CFTC Bad Boy After E-Mini Fraud (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4897/cftc-towers/
On Wall Street, if you are found to have engaged in certain misconduct or criminal activity, you're tagged with the label of a "Bad Boy," which can impact your ability to engage in various forms of employment, pursue various business ventures, and may delay your ability to issue public offerings. Pointedly, being deemed a "Bad Boy" may invoke the Reg D "ineligible issuer" disqualification, which is a really, really big pain in the ass for many of Wall Street's large institutions. The invocation of a Bad Boy disqualification is supposed to get your attention and ensure that you feel some pain for your misconduct. In theory, that's a great idea. In practice, it's often a joke -- as demonstrated in today's featured DOJ and CFTC $67 million settlement with Tower Research Capital LLC.
As behemoth brokerage firms go zero-commission on trades, advisors are concerned (CNBC.com by Andrew Osterland)
https://www.cnbc.com/2019/11/06/as-brokerage-firms-go-to-zero-commission-on-trades-advisors-worry.html
An excellent thought-piece that examines the ripple effects of zero commissions and the possible impact upon RIAs and other market participants. For example:
The clients of RIAs who use the custodial platforms will clearly benefit from lower costs, yet advisors are not without concerns about the development."The thing you wonder is if commissions are going away, will costs rise in other areas," said Matthew Young, president of Richard C. Young & Co., a Naples, Florida-based firm that uses Fidelity for custody of client assets
Ex-Merrill broker-turned-RIA settles CE cheating allegations (On Wall Street by Kenneth Corbin)
https://onwallstreet.financial-planning.com/news/ex-merrill-broker-now-ria-settles-ce-cheating-allegations-with-finra
https://onwallstreet.financial-planning.com/news/ex-merrill-broker-now-ria-settles-ce-cheating-allegations-with-finra
In an interesting piece by Wall Street-beat writer Kenneth Corbin, we see how the industry's continuing education system is gamed by those who should know better -- and we see the consequences of invoking FINRA's ire. As noted in part in Corbin's article:
Merrill Lynch terminated Lee's employment in April 2018, citing a "failure to personally complete mandatory firm compliance training" as a reason for his firing in a filing submitted to FINRA the following month.Under the settlement, Lee accepted a suspension of 18 months, during which he is not permitted to associate with any FINRA member firm, and agreed to a fine of $15,000.
SEC Dismisses Claims Against Tyler Peters (SEC Release)
https://www.sec.gov/litigation/litreleases/2019/lr24661.htm
As set forth in part in the SEC Release:
On November 6, 2019, the U.S. District Court for the Southern District of New York entered an order dismissing with prejudice the U.S. Securities and Exchange Commission's complaint against Tyler Peters. The court's order was based on the SEC's motion to dismiss its claims against Peters. This matter related to Peters' role in buying and selling residential mortgage-backed securities at Nomura Securities International.Peters, along with the two other defendants in the SEC's civil lawsuit, was also criminally charged by the U.S. Attorney for the District of Connecticut based on some of the same facts underlying the SEC's action. Peters was acquitted in the criminal case after a jury trial.
Bill Singer's Comment: I have long advocated for a law requiring federal prosecutors and regulators to issue a press release disclosing when various complaints, indictments, orders, etc. have been dismissed. Moreover, I believe that such press releases should be issued with the same prominence as the earlier releases were that announced the filing of charges or the issuance of orders (See, for example: "SEC Charges Three RMBS Traders with Defrauding Investors" (SEC Release September 8, 2015) https://www.sec.gov/litigation/litreleases/2015/lr23336.htm . As such, I applaud the SEC for taking the appropriate step in announcing the dismissal of the underlying SDNY case and Peters' acquittal in his criminal matter.
Ohio Man Sentenced for Investment Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-ma/pr/ohio-man-sentenced-investment-fraud-scheme
After a two-week trial in the United States District Court for the District of Ohio, Stephan Kuljko was convicted on four counts of wire fraud and one count of obstruction of justice; and he was sentenced to 156 months in prison plus three years of supervised release; and he was ordered to pay $2,772,160 in restitution. As alleged in part in the DOJ Release:
From 2006 through 2017, Kuljko spun a false story about himself as a wealthy man who won millions in the Ohio Lottery that he turned into hundreds of millions by investing in a Texas oil business and casinos. Kuljko solicited money from people by telling them that his vast fortune had been frozen in a bank account because of problems with the IRS, and that he needed money to pay for lawyers and to travel around the world to try to free up those funds. Kuljko operated his scheme mostly behind the scenes, using an associate in Arizona to solicit funds. Victims were promised huge returns, in many cases more than a million dollars for providing tens of thousands to assist Kuljko. The scheme also involved soliciting money to obtain and market what Kuljko represented as an extremely valuable, large uncut emerald. As with his other representations, the emerald deal was fictitious. In fact, the evidence at trial established that Kuljko had never won the lottery or invested in any Texas oil venture, had no bank account nor hundreds of millions of dollars, and the IRS was not tying up any of his money. Kuljko instead worked out of his home, buying and selling things like used snow blowers and rototillers.