Securities Industry Commentator by Bill Singer Esq

Market Structure & COVID-19: Handling Increased Volatility and Volumes (FINRA Unscripted)

FINRA Fines Kestra Investment Services For Regulation S-P Violations. 
In the Matter of Kestra Investment Services, LLC, Respondent (FINRA AWC)

Former Stanford Group Company Chief Compliance Officer Files SEC Appeal With Wrong Court

Bernerd E. Young, Petitioner, v. Securities and Exchange Commission, Respondent (Opinion, United States Court of Appeals for the District of Columbia Circuit)

Tesla's Elon Musk rails against government coronavirus mandates / The billionaire slammed the government for coronavirus stay- at-home orders (Fox Business News by Suzanne O'Halloran)

New York City's Farmers Markets Set New Safety Standards /  Farmers and producers have benefited from being part of a collection of small businesses, working together to survive (Bloomberg by Kate Krader)

The Human Cost of Cheap Meat Gets Higher in the Pandemic /  Working in a processing plant has always been grueling and dangerous. With Covid-19, it's even scarier. (Bloomberg by Peter Coy)

[In]Securities Guest Blog: Get What You Need by Aegis Frumento Esq (BrokeAndBroker.com Blog)

[K]estra contracted with a third-party vendor to provide assistance to recruited registered representatives who had agreed to join Kestra. Specifically, Kestra worked with the vendor to create a template spreadsheet to collect information about recruited representatives' customers, including their nonpublic personal information. The spreadsheet contained fields for, among other items, customers' social security numbers, driver's license numbers, and birth dates, as well as fields pertaining to their financial position (account numbers, annual incomes, and net worth, etc.). 

In certain instances, Kestra employees worked with recruited representatives to complete the spreadsheet while the representatives were still registered through their prior broker-dealers. For example, Kestra employees arranged and participated in conference calls between the vendor and the recruited representatives, and provided recruited representatives with guidance about how to complete the spreadsheet. Kestra employees, however, did not receive copies of the spreadsheet or have access to the nonpublic personal information provided to the vendor. Once a recruited representative became registered through Kestra, the vendor used the spreadsheet to automatically pre-populate new account forms, which the vendor sent to customers who agreed to open Kestra accounts. Kestra typically reimbursed recruited representatives for the fees charged to them by the vendor to generate Kestra's new account documents. 

Kestra failed to take any steps to inquire whether the recruited representatives or their broker-dealers at the time had notified customers about the disclosure of their nonpublic personal information, nor did Kestra take any steps to inquire whether customers had been given an opportunity to opt-out of having their information disclosed. Kestra also failed to provide any guidance to the recruited representatives concerning the disclosure of customers' nonpublic personal information to the vendor. 

Kestra's arrangement with the third-party vendor resulted in 68 recruited representatives taking nonpublic personal customer information from their broker-dealers and disclosing it to the vendor during the Relevant Period. In so doing, Kestra caused the other brokerdealers to violate Regulation S-P.

Bernerd Young, former chief compliance officer of Stanford Group Company ("SGC" or the "Firm"), a dually registered investment adviser and broker-dealer, appeals from an initial decision finding that he violated antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and rules thereunder. ¹ Based on her findings of violation, the law judge issued a cease-and-desist order against Young; barred him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and prohibited him from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter. The law judge also ordered Young to pay $591,992.46 in disgorgement, with prejudgment interest, and assessed a third-tier civil penalty of $260,000. We base our findings on an independent review of the record, except with respect to those findings not challenged on appeal. 

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Footnote 1: The law judge found that SGC violated the antifraud provisions of Advisers Act Section 206(2) and that Young was a cause of that violation. The law judge further found that Young violated the antifraud provisions of Securities Act Section 17(a); violated, and aided and abetted and caused SGC's violations of, Exchange Act Section 10(b) and Exchange Act Rule 10b-5; and aided and abetted and caused SGC's violations of Advisers Act Sections 206(1) and (2) and Exchange Act Section 15(c)(1). Daniel Bogar, Initial Decision Release No. 502, 2013 WL 393608 (Aug. 2, 2013).

Young had sixty days to seek review of the Commission's decision, either from our Circuit or the circuit in which he resides or maintains his principal place of business. See 15 U.S.C. §§ 77i(a), 78y(a)(1), 80b-13(a), and 80a-42(a). On May 23, 2016, the last day to file, he filed a petition for review, but filed it with the wrong court - the District of Columbia Court of Appeals (DCCA). Young had previously contacted the DCCA and received instructions on how to file a petition there. On May 24, the DCCA contacted Young and informed him of his error. Young, who happened to be in Washington, D.C. at the time, retrieved his petition from the DCCA and refiled it in our Court later that same day - one day too late. Young's petition was docketed, and we issued an order to show cause why the petition should not be dismissed for lack of 6 jurisdiction. After Young explained the circumstances, we discharged the order to show cause and directed the parties to address our jurisdiction in their merits briefs. 

In 2012 the Securities and Exchange Commission prosecuted Bernerd Young for multiple securities violations based on his participation in a multi-billion dollar Ponzi scheme between 2006 and 2009, during the height of the financial crisis. After a hearing, an administrative law judge (ALJ) found him liable on most of the charges and imposed various penalties, including disgorgement of nearly $600,000, which represented about half of the compensation he received between 2006 and 2009. The Commission affirmed the ALJ's decision, and Young filed a petition for review. However, he filed his petition in the District of Columbia Court of Appeals, which is the wrong court. By the time he realized his mistake and filed the petition in our Court, the sixty-day deadline for filing had passed. 

We do not pass upon whether the statutory time limit to file a petition for review is jurisdictional and subject to equitable tolling. Instead, we conclude that, even assuming it is a non-mandatory claims processing rule, Young has failed to demonstrate entitlement to equitable tolling. Filing a petition for review in a state court that clearly lacks jurisdiction over the petition does not toll the deadline for filing in our Court. And because no extraordinary circumstance beyond his control prevented him from timely filing in our Court, he is not entitled to equitable tolling, and we must dismiss his petition.

Tesla CEO Elon Musk summed up his feeling and "outrage" about the government-mandated U.S. coronavirus closings and restrictions every American is dealing with as "fascist" during a cuss-filled rant on the company's earnings call Wednesday evening.

"The extent of shelter in place or frankly what I would call it forcibly imprisoning people in their homes is against all their constitutional rights ... and erasing peoples freedoms in ways that are horrible and wrong and not why people came to America or built this country, what the f--k," Musk lamented before excusing himself for the curse.

As their market sales have decreased, the small honey producers from New York's Finger Lakes region have transitioned to online sales. Because honey is expensive to ship in glass bottles, the company has started replacing it with thick, food-grade plastic bags (4 pounds, $23). It's much less expensive, and customers say they like it because they can refill their jars, a form of recycling. Trembly has also seen increased sales for their ambrosia honey, which contains bee pollen and propolis and has immune boosting properties. (Added tip: Healthy products sell.)

It's not just advocates for workers and food safety who are angry at the meatpackers. It's farmers and ranchers. On April 8 the National Cattlemen's Beef Association wrote to Trump asking for an expanded investigation into the "striking disparity" between the low prices paid for cattle and hogs and the high prices packers receive for their output. The USDA had been investigating price disparities following a fire at a large packing plant last August in Holcomb, Kan., knocked out 6% of U.S. cattle-processing capacity, lowering demand for cattle. It's since added the Covid-19 shutdowns to its investigation.

• Securities Industry Commentator
• Bill Singer