The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
June 8, 2021
The TD Ameritrade Stockbroker and The Customer Were Friends Until Options Trading Came Between Them (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5881/finra-beslagic-friends/
In a recent FINRA regulatory settlement, we got two friends, one of whom is a stock broker. The stockbroker may well have thought that he was doing his friend a favor by trading options. In fact, the friend may also have appreciated the gesture. That is until the friend/customer didn't quite appreciate the stockbroker's trading; and we're talking about lots of trading.
FINRA Alerts Firms to Phishing Email Using "gateway-finra.org" Domain Name (FINRA Regulatory Notice 21-20)
https://www.finra.org/sites/default/files/2021-06/Regulatory-Notice-21-20.pdf
The FINRA Notice warns in part that;
FINRA warns member firms of an ongoing phishing campaign that involves fraudulent emails (see sample in Appendix) purporting to be from FINRA and using the domain name "@gateway-finra.org." The email asks the recipient to click a link to "view request" and provide information to "complete" that request, noting that "late submission may attract penalties."FINRA recommends that anyone who clicked on any link or image in the email immediately notify the appropriate individuals in their firm of the incident.The domain of "gateway-finra.org" is not connected to FINRA and firms should delete all emails originating from this domain name
SEC Charges Portfolio Manager with Using Forged Document to Offer Securities to Investor (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25108.htm
https://www.sec.gov/litigation/litreleases/2021/lr25108.htm
In a Complaint filed in the United States District Court for the District of New Jersey
https://www.sec.gov/litigation/complaints/2021/comp25108.pdf, the SEC charged Thomas Nicholas Salzano with The Securities and Exchange Commission today charged Thomas Nicholas Salzano with violations of the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act. The SEC Release asserts that Salzano was arrested on March 4, 2021, and charged with wire fraud and identity theft related to the same facts by the United States Attorney's Office for the District of New Jersey.
https://www.sec.gov/litigation/complaints/2021/comp25108.pdf, the SEC charged Thomas Nicholas Salzano with The Securities and Exchange Commission today charged Thomas Nicholas Salzano with violations of the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act. The SEC Release asserts that Salzano was arrested on March 4, 2021, and charged with wire fraud and identity theft related to the same facts by the United States Attorney's Office for the District of New Jersey.
As alleged in part in the SEC Release:
[I]n January 2019, Salzano, an executive advisor and portfolio manager at National Realty Investment Advisors, LLC, a New Jersey-based private real estate management firm, sent the loan document to an investor to obtain an investment in a joint venture opportunity offered by the firm. The complaint alleges that Salzano provided the investor a term sheet for a loan that purportedly was being used to finance the real estate project in which the investor would invest. As alleged, the term sheet falsely stated that a third-party lender had committed to provide a $25 million loan for the project, and that the term sheet contained the forged signature of the lender's chief executive officer. Further, the complaint alleges that Salzano knowingly provided the false term sheet to the investor in an attempt to secure the investment.
https://www.sec.gov/news/press-release/2021-94
In a Complaint filed in the United States District Court for the Southern District of New York
https://www.sec.gov/litigation/complaints/2021/comp-pr2021-94.pdf, the SEC charged Neuralstem Inc.'s senior clinical trial project manager Holly Hand and Chad Calice with insider trading. Without admitting or denying the complaint's allegations, Calice and Hand consented to the entry of a final judgment that enjoins them from violating the charged provisions and requires each of them to pay a civil penalty. Further, Calice agreed to pay a $222,184 penalty, and Hand agreed to pay a $103,875 penalty. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2021/comp-pr2021-94.pdf, the SEC charged Neuralstem Inc.'s senior clinical trial project manager Holly Hand and Chad Calice with insider trading. Without admitting or denying the complaint's allegations, Calice and Hand consented to the entry of a final judgment that enjoins them from violating the charged provisions and requires each of them to pay a civil penalty. Further, Calice agreed to pay a $222,184 penalty, and Hand agreed to pay a $103,875 penalty. As alleged in part in the SEC Release:
[A]fter Hand learned of negative efficacy results from the trial, she tipped Chad Calice, who then sold all of his Neuralstem stock ahead of the public announcement of the negative news. The complaint alleges that while selling his shares, Calice tipped off his uncle, who then also sold his entire Neuralstem position that day. According to the complaint, after the negative news was announced the next morning, the price of Neuralstem stock dropped by approximately 50%. As alleged, by selling their stock in advance of the news, Calice avoided losses of $103,875 and his uncle avoided losses of $14,434.
SEC Charges Florida Real Estate Companies and Executive with Misappropriating Investor Money (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25109.htm
https://www.sec.gov/litigation/litreleases/2021/lr25109.htm
In a Complaint filed in the United States District Court for the Southern District of Florida
https://www.sec.gov/litigation/complaints/2021/comp25109.pdf, the SEC charged Larry B. Brodman and his companies with violating the antifraud and offering registration provisions of the federal securities laws, and Anthony Nicolosi with violating the offering registration and broker-dealer registration provisions of the federal securities laws. The Complaint alleges that Brodman and his companies violated Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder; and that Nicolosi violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act. The Defendants consented to bifurcated settlements, agreeing to be permanently enjoined from violations of the charged provisions with monetary relief to be determined by the court at a later date. Further, Brodman and his companies have consented to the appointment of a receiver to take control of the real properties purchased with investor funds. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2021/comp25109.pdf, the SEC charged Larry B. Brodman and his companies with violating the antifraud and offering registration provisions of the federal securities laws, and Anthony Nicolosi with violating the offering registration and broker-dealer registration provisions of the federal securities laws. The Complaint alleges that Brodman and his companies violated Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder; and that Nicolosi violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act. The Defendants consented to bifurcated settlements, agreeing to be permanently enjoined from violations of the charged provisions with monetary relief to be determined by the court at a later date. Further, Brodman and his companies have consented to the appointment of a receiver to take control of the real properties purchased with investor funds. As alleged in part in the SEC Release:
[F]rom January 2016 through September 2020, Brodman, his company Property Income Investors LLC, and his various other entities raised approximately $9.06 million from about 156 investors through a series of unregistered securities offerings. The complaint alleges that Brodman and his companies told investors that offering proceeds would be used to purchase turnkey, multifamily properties located in South Florida, which would then be renovated and rented to tenants. As alleged in the complaint, however, Brodman misappropriated approximately $1.12 million in investor funds for his own personal use. In addition, Brodman and his companies allegedly misused investor money by paying sales commissions totaling about $1.2 million to unregistered sales agents, despite telling investors that commissions would only be paid to "licensed broker/dealers," and by using investor funds to pay a portion of the purported profits that were distributed to investors. The complaint alleges that Nicolosi, the companies' top producing sales agent, offered and sold the unregistered securities despite the fact that he was not a registered broker.
https://www.justice.gov/usao-ma/pr/oregon-biotech-consultant-sentenced-insider-trading-scheme
Mark Joseph ahn, 58, pled guilty in the United States District Court for the District of Massachusetts to two counts of securities fraud, and he was sentenced to six months in prison plus six months of home detention and two years of supervised release, and he was ordered to pay a fine of $5,500, a forfeiture of $49,421 and restitution to be determined. As alleged in part in the DOJ Release:
From April to August 2017, Ahn, a long-time senior corporate executive and board director for biotech companies, worked as a consultant for a New York firm, and advised it during its efforts to acquire Dimension Therapeutics, Inc., a biotech firm formerly headquartered in Cambridge, Mass. In the course of his work for the New York firm, Ahn learned about Dimension's intention to be acquired by another biotech firm, the details and the timing of his employer's proposals to acquire Dimension and gained access to confidential information about Dimension's business. Ahn thereafter bought Dimension stock while in possession of that nonpublic information. When Dimension announced that it would be acquired in August 2017, its stock increased 262% in one day.The SEC previously filed a separate civil action against Ahn in federal court in Boston.
Former CEO of Publicly Traded Company Sentenced to 15 Months' Imprisonment and Ordered to Pay More Than $1.2 Million in Restitution for Securities Fraud Conspiracy (DOJ Release)
https://www.justice.gov/usao-edny/pr/former-ceo-publicly-traded-company-sentenced-15-months-imprisonment-and-ordered-pay
Former HD View 360, Inc. Chief Executive Officer Dennis Mancino pled guilty in the United States District Court for the Eastern District of New York to conspiracy to commit securities fraud, and he was sentenced to 15 months in prios and ordered to pay over $1.2 million in restitutuion and $257,000 in forfeiture. As alleged in part in the DOJ Release:
Between July 2017 and February 2018, Mancino conspired to increase HD View's stock price by executing numerous fraudulent matched trades designed to create the false appearance that HD View's stock price had risen as a result of genuine market demand. Once HD View's stock price increased, the conspirators sold the stock for profit and caused more than $1.2 million in losses to more than 1,200 HD View investors. Mancino also agreed to pay kickbacks to stock brokers who would execute manipulative trades designed to increase the price and trading volume of HD View's stock.
Prepared Remarks at CFO Network Summit (SEC Chair Gary Gensler)
https://www.sec.gov/news/speech/gensler-cfo-network-2021-06-07
SEC Chair opines about executive stock ownership and insiders' sales of their companies' shares. Pointedly, Chair Gensler believes that "cracks" have developed in the SEC's regulatory scheme and he offer his thoughts on how to seal those breaches. In part, Gensler muses that:
Make no mistake: As the rule stands today, cancelling or amending any 10b5-1 plans calls into question whether they were entered into in good faith. If insiders don't act in good faith when using 10b5-1 plans, those plans will not offer them an affirmative defense.In addition, I've asked staff to consider other potential reforms to the rule, including the intersection with share buybacks.Many of your companies may already do these things as they're considered best practices for 10b5-1 plans.I believe, though, that our capital markets might be better served if these practices were consistently required. In addition to evaluating the rule itself, SEC staff will use all of the tools in our toolbox to ensure we are identifying and punishing abuses of 10b5-1 plans.These issues speak to the confidence that investors have in the markets - that everybody, from working families to big institutions to insiders, has a level playing field. Anytime we can increase investor confidence in the markets, that's a good thing. It helps both investors and businesses seeking to raise capital, grow, and innovate.
2Cir Affirms FINRA Arbitration Award to Jefferies of $1 Million Liquidated Damages For Aborted Employment (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5883/finra-arbitration-jefferies-gegenheimer/
You're unhappy at your present employer. You negotiate a deal with another employer. Apparently you're really wonderful at what you do because you're offered a nice compensation package. Further, you did such a fabulous job selling yourself that your likely-new-employer requests a million bucks in liquidated damages in the event you don't start working for them by a mutually agreed-to date. So . . . like what could go wrong with all of that? Apparently, a lot because we got a 17-page FINRA Arbitration Award and decisions from two federal courts!