The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
March 26, 2020
SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected By Coronavirus Disease 2019 (COVID-19) / Division of Corporation Finance Issues Related Disclosure and Other Guidance. SEC Continues to Closely Monitor Impact of Coronavirus on Investors and Capital Markets (SEC Release)
Woe be it for me to get in the way of Texas Lieutenant Governor Dan Patrick. Truly, I urge the Lt. Governor to lead by example! If, after all, it's best that we just sacrifice the lame, the sick, and the elderly for the "economy," Trump's allies should step up to the plate. Talk is cheap. If you're going to urge us to drink the Kool-Aid, why don't you take the first gulp? I wonder whether Patrick suggested that the 62-year-old, wheelchair-bound Governor of Texas, Gregg Abbott, also take one for the ailing economy? Why Dan, it profits a man nothing to give his soul for the whole world but for the economy?
There was a time when Americans locked arms and ranks. When we stood our ground together against a common foe. We didn't say, come, take the elderly. We didn't urge the elderly to sacrifice themselves. We rose to the occasion as if we were a mere 300 Spartans. We rose to the occasion, together, at Lexington and Concord. Lt. Governor Patrick, do you even remember the Alamo? What you suggest has Travis, Crockett, and Bowie turning over in their graves.
How could this possibly happen in 2020? These glib fools who appear as guests on television are ignorant of the horrors of a not-so-distant time when the lame, the sick, the elderly were sacrificed for the better of the State. Ein Volk, ein Reich, ein Führer. Oh yes, I know, there are good people on both sides of the eugenics issue. For those of you who are yearning to jump-start the elderlies' death for the sake of the economy, here's a DIY video:
http://www.brokeandbroker.com/5136/aegis-frumento-insecurities-plague/
Attorney Aegis Frumento laments that it may be that by the time the coronavirus pandemic is over, most of us will know someone who will have died. There may not be much we can do about it, he concedes, but if we are given the opportunity to make choices, Aegis hopes we all show the common decency to side with the victims and not to join forces with the pestilence.
https://www.sec.gov/litigation/litreleases/2020/lr24781.htm
In a Complaint filed in the United States District Court for the District of Connecticut
https://www.sec.gov/litigation/complaints/2020/comp24781.pdf, the SEC charged Bernard Findley and Halitron, Inc., with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and seeks disgorgement of ill-gotten gains plus prejudgment interest, penalties, and injunctive relief. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2020/comp24781.pdf, the SEC charged Bernard Findley and Halitron, Inc., with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and seeks disgorgement of ill-gotten gains plus prejudgment interest, penalties, and injunctive relief. As alleged in part in the SEC Release:
[H]alitron, Inc. and its CEO, Bernard Findley, issued false and misleading press releases that materially misrepresented Halitron's financial condition and the value of the company's assets in an effort to prop up the value of Halitron's stock and thereby attract financiers who provided funding to Halitron in exchange for discounted shares of Halitron stock. The press releases allegedly included false and misleading descriptions of a purported financing arrangement that Halitron had in place, and falsely claimed that Halitron was implementing a stock buyback program. Findley allegedly misappropriated a majority of the money Halitron received from the financiersby using those funds to cover personal expenses and pay off personal credit card debt.
https://www.sec.gov/litigation/litreleases/2020/lr24780.htm
In a Complaint filed in the United States District Court for the District of Connecticut
https://www.sec.gov/litigation/complaints/2020/comp24780.pdf, the SEC alleged that Donald H. Hunter violated the antifraud provisions of Sections 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2020/comp24780.pdf, the SEC alleged that Donald H. Hunter violated the antifraud provisions of Sections 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. As alleged in part in the SEC Release:
[I]n 2012 the Financial Industry Regulatory Authority found that Hunter had committed fraud in connection with the sale of promissory notes to some of his broker-dealer clients, and permanently barred him from associating with any FINRA-registered firm. The complaint alleges that Hunter subsequently established You Angel Finance as a private fund with no FINRA registration. As alleged, from late 2016 through 2018, while acting as investment adviser to You Angel Finance, Hunter raised approximately $430,000 from investors, claiming that You Angel Finance was supplying seed capital to or purchasing shares from a private drug research company. The complaint alleges that Hunter had acquired the company's shares personally or through companies he controlled, but as a result of the FINRA bar he was unable to sell them directly or indirectly to brokerage customers, as he had in the past. The complaint further alleges that Hunter failed adequately to disclose that the fund purchased the shares from Hunter or entities he controlled, or that he set the prices at which he sold those shares to the fund.
https://www.justice.gov/usao-sdny/pr/pokerstars-founder-pleads-guilty
Isai Scheinberg, the founder and former executive of online poker company PokerStars pled guilty in the United States District Court for the Southern District of New York to one count of operating an illegal gambling business. With Scheinberg's guilty plea, all 11 defendants originally charged in the 2011 Indictment - including Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul Tate, Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie, and John Campos - have now pled guilty. As set forth in part in the DOJ Release:
As alleged in the Indictment filed in March 2011 in Manhattan federal court, PokerStars was founded in approximately 2001, with headquarters in the Isle of Man. PokerStars offered online poker games to players around the world, including in New York, New York. SCHEINBERG was PokerStars' founder and principal. On October 13, 2006, the United States enacted the Unlawful Internet Gambling Enforcement Act ("UIGEA"), making it a federal crime for gambling businesses to "knowingly accept" most forms of payment "in connection with the participation of another person in unlawful Internet gambling." With the enactment of UIGEA, leading internet gambling businesses - including the leading internet poker company doing business in the United States at that time - terminated their United States operations. However, PokerStars, along with Full Tilt Poker and Absolute Poker, continued illegally to make internet poker available to U.S. customers through March 2011.In pleading guilty today, SCHEINBERG admitted that he knew operating a business that offered internet poker to New Yorkers violated state law, and that it was the clear position of the U.S. government that offering online poker in the United States violated federal law. Nonetheless, Scheinberg decided to continue running his multimillion-dollar online poker business in the United States.In 2012, PokerStars and its related companies (the "PokerStars Companies") agreed to settle a civil forfeiture and civil money laundering action brought by the Office. That settlement involved, among other things, the PokerStars Companies forfeiting $547 million to the United States and assuming approximately $184 million in foreign player liabilities of another online poker company subject to the settlement. Additionally, in June 2013, Mark Scheinberg, ISAI SCHEINBERG's son, agreed to forfeit to the United States an additional $50 million of distributions he received from the operation of the PokerStars Companies.
SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected By Coronavirus Disease 2019 (COVID-19) / Division of Corporation Finance Issues Related Disclosure and Other Guidance. SEC Continues to Closely Monitor Impact of Coronavirus on Investors and Capital Markets (SEC Release)
https://www.sec.gov/news/press-release/2020-73
https://www.sec.gov/news/press-release/2020-73
As noted in part in the SEC Release, the SEC is:
extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19. In addition, the SEC's Division of Corporation Finance issued today its current views regarding disclosure considerations and other securities law matters related to COVID-19.. . .[S]ubject to certain conditions, provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020. Today's Order supersedes and extends the Commission's Original Order of March 4, 2020. Among other conditions, companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed. The Commission may provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. Companies and their representatives are encouraged to contact SEC staff with questions or matters of particular concern.. . .[P]rovide certain investment funds and investment advisers with additional time with respect to holding in-person board meetings and meeting certain filing and delivery requirements, as applicable. Today's Orders supersede and extend the filing periods covered by the Commission's Original Orders of March 13, 2020. Among other conditions, entities must notify the Division staff and/or investors, as applicable, of the intent to rely on the relief, but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur. The time periods for relief are described in the Orders. The Commission may provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. Firms and financial professionals are encouraged to contact SEC staff with questions or matters of particular concern.
In a FINRA Arbitration Statement of Claim filed in November 2019, public customer Claimant Huber, representing herself pro se, asserted that Respondent Morgan Stanley:
repeatedly misinformed Claimant as to the procedure for taking a distribution from her403(b) account, resulting in undue delay and causing Claimant to incur an unnecessarytax liability and financial difficulties.
In a FINRA Arbitration Statement of Claim filed in April 2019, public customer Claimants asserted violation of duties owed to Claimants; negligence and breach of fiduciary duty; breach of contract; failure to review and update; violation of industry rules and standards of professional care; unsuitability; violation of standards of commercial honor and principles of trade; use of manipulative, deceptive or other fraudulent devices; liability for employees and member misconduct; and other violations of law. The allegations were in connection with Claimants purchase of a Puerto Rico Bond, and Claimants sought $50,000 in compensatory damages,m punitive damages, interest, and fees. The sole FINRA Arbitrator found Respondent Oriental Financial Services liable and ordered the firm to pay to Claimants $37,000 plus interest; and to reimburse the Claimants $600 in FINRA filing fees. The Arbitrator also published this note:
Bill Singer's Comment: Compliments to FINRA Arbitrator Dineo Coleman Gary for taking on a ticklish issue pertaining to FINRA's so-called Six Year Eligibility Rule. The Arbitrator stakes out an edgy yet compelling position that FINRA Rule 12206 does not preclude a claim involving an underlying purchase that is outside the six-year threshold, but, rather, the Rule countenances an "occurrence or event giving rise to the dispute" that falls within that horizon. Whether the Arbitrator's interpretation and characterization of the material events will prevail on appeal remains to be seen -- particularly since an appeal is not necessarily a given. Frankly, it looks like Claimants' lawyers, Mariano Betancourt Figueroa and Cristina Quiles Santos: Juan C. Blasini Gonzalez, Esq., Blasini Gonzalez Law Office, Guaynabo, Puerto Rico https://jcbglaw.com/home, did one hell of a job!On or about October 8, 2019, Respondent filed a Motion to Dismiss pursuant to Rule 12206(a) of the Code of Arbitration Procedure ("Code") in which it asserted, among other things, that the purchases in this matter predate April 23, 2013, and are thus ineligible for arbitration. In their Opposition to Motion to Dismiss dated October 15, 2019, Claimants asserted, among other things, that Rule 12206(a) of the Code does not provide that a claim must be brought within six years of the "purchase" of the security; rather, the rule explicitly provides that the claim must be brought within six years of the "occurrence or event giving rise to the dispute," which is an issue of fact for the Panel to decide. In its Reply to Opposition to Motion to Dismiss dated October 21, 2019, Respondent argued, among other things, that all of Claimants' substantive claims related to occurrences or events outside the six-year eligibility window. On or about October 22, 2019, Claimants filed a Sur-reply in Opposition to the Motion to Dismiss in which they argued, among other things, that Claimants' account continued to be damaged during the six-year eligibility period. On or about October 30, 2019, the Arbitrator issued an Order that denied Respondent's Motion to Dismiss.