The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
July 7, 2021
Former CFO Pleads Guilty to Embezzling over $1.6 Million (DOJ Release)Angry Variable Annuity Customer Vexatiously Pursues His Legal Rights (BrokeAndBroker.com Blog)
FINRA Sanctions Rep and Sanctuary Securities Over NT-ETFs (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5941/finra-sanctuary-etf/
Once upon a time in Wall Street Regulationland we had so-called "leveraged and inverse" ETFs; now, we have Non-Traditional Exchange Trade Funds (NT-ETFs), which have become FINRA's unloved stepchild. Because of the risks and the complexity of these exotic ETFs, FINRA deems them unsuitable for most retail investors when the investment is held beyond one trading day. Somewhat lost in FINRA's hostility seems to be a recognition, grudging as it might be, that NT-ETFs are legal, approved, and regularly traded. If I want to hold an NT-ETF for two or more trading days, what's it to you? Sometimes I even drink what's in a container of milk beyond the printed expiration date.
https://www.justice.gov/usao-de/pr/statement-us-attorney-david-c-weiss-regarding-wilmington-trust-company
As previously posted in the Securities Industry Commentator (January 13, 2021)The United States Attorney's Office for the District of Delaware and our federal partners opened the investigation into the circumstances surrounding the demise of the Wilmington Trust Company in 2011. We have interviewed hundreds of witnesses and reviewed hundreds of thousands of documents. As is typically the case in any long term investigation and prosecution, we experienced successes and disappointments along the way. We secured guilty pleas to fraud and related offenses from seven defendants and negotiated a settlement with the bank which, among other things, called for the forfeiture of 60 million dollars for victims. The Third Circuit's decision, on the other hand, was extremely disappointing and limited our options moving forward.Prosecutors must constantly weigh a number of factors in exercising prosecutorial discretion. Those factors include not only the likelihood of obtaining a conviction, but also competing public safety priorities, and the availability of finite resources to address these priorities. In my judgment, the practical implications of the Third Circuit's opinion and the challenges currently facing our community--such as unprecedented violent crime, the rising number of opioid overdose deaths, and domestic terrorism--counsel in favor of declining to retry David Gibson, Robert V.A. Harra, William North and Kevyn Rakowski.
http://www.rrbdlaw.com/5637/securities-industry-commentator/#wilmington
3Cir Reverses Wilmington Trust Defendants' Convictions for False Statement and Certification and Vacates for Conspiracy and Securities Fraudhttp://brokeandbroker.com/PDF/Harra3CirOp210112.pdfAs set forth in the 3Cir's "Syllabus":When a defendant is charged with false reporting based on an ambiguous reporting requirement, what is the prosecution's burden at trial as to the element of falsity? Is it sufficient for the prosecution to prove the statement was false only under the Government's interpretation of the requirement, or must it prove the statement was false under each objectively reasonable interpretation of the requirement? In the balance hang the convictions of four former executives of Wilmington Trust Corporation, a bank that, in the wake of the Great Recession of 2008, excluded certain commercial real estate loans from those it reported as "past due" to the Securities and Exchange Commission and the Federal Reserve. The executives maintained that, under a reasonable interpretation of these requirements, the exclusion of the loans was proper, but the District Court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury then found the executives' reporting constituted "false statements" for purposes of 18 U.S.C. § 1001, 15 U.S.C. § 78m, and related statutes and convicted Defendants on all counts.We hold today that to prove falsity beyond a reasonable doubt in this situation, the Government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant's statement was also false under the alternative, objectively reasonable interpretation. And because the Government here produced insufficient evidence from which a rational jury could find Defendants' statements false under this rule, we will reverse Defendants' false statements convictions and remand on those counts for entry of judgments of acquittal. As for Defendants' conspiracy and securities fraud convictions, however, which were charged in the alternative on an independent theory of liability, we will vacate and remand for retrial.
Former CFO Pleads Guilty to Embezzling over $1.6 Million (DOJ Release)
https://www.justice.gov/usao-edca/pr/former-cfo-pleads-guilty-embezzling-over-16-million
Christopher Firle pled guilty in the United States District Court for the Eastern District of California to one count of wire fraud, and he agreed to pay $1,937,706 in restitution to his former employer, and to forfeit $1,652,269.44 to the United States. As alleged in part in the DOJ Release:
[F]irle was the Chief Financial Officer of a holding company that managed several vehicle dealerships. From January 2016 through September 2019, Firle misappropriated over $1.6 million from the company. He carried out his embezzlement scheme in multiple ways, including by using company credit cards to pay for over $750,000 in personal expenses. The unauthorized charges included tickets to sporting events and purchases at several retail stores, including Bergdorf Goodman, Chanel, Hermès, Nordstrom, and Tiffany & Co. Firle also initiated over 30 unauthorized wire transfers from the company to a family member. Those transfers totaled over $500,000. Additionally, Firle issued over 30 unauthorized company checks to himself that totaled over $165,000, and he withdrew over $50,000 from a company account without authorization. Finally, Firle issued himself excess bonus payments totaling almost $160,000.
Margin Interpretation Updates / FINRA Announces Updates to the Interpretations of FINRA;s Margin Rule Regarding Minimum Equity (FINRA Regulatory Notice 21-24 / July 6, 2021)
https://www.finra.org/sites/default/files/2021-07/Regulatory-Notice-21-24.pdf
In pertinent part FINRA Rule 21-24 announces that [Ed: footnotes omitted]:
FINRA Rule 4210(b) provides the amount of initial margin that must be in a customers' account.1 Rule 4210(b) also limits when withdrawals of cash or securities may be made from the account. Firms have raised questions regarding several aspects of this paragraph, including when the minimum equity amount is not required for fully paid securities and when excess cash in margin accounts that may hold fully paid securities may be withdrawn. FINRA is replacing Interpretation /02 to Rule 4210(b) with modified interpretations divided into separate topics. Accordingly, new Interpretation /021 addresses the minimum equity requirements in a margin account clarifying when the $2,000 amount is not required because securities may be fully paid. New Interpretation /021 also clarifies treatment of securities transactions resulting in positions covered by Rule 4210(e)(2)(F), (G) or (H) or other provisions of Rule 4210 that allow the member to take a capital charge in lieu of collecting margin. New Interpretation /022 incorporates the section of current Interpretation /02 that addresses the effect of market value decline on the minimum equity requirements. New Interpretation /023 clarifies when withdrawals are permissible. New Interpretation /024 clarifies minimum equity requirements for a cash account. Finally, new Interpretation /025 states the minimum equity requirements for a pattern day trader.
Angry Variable Annuity Customer Vexatiously Pursues His Legal Rights (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5940/byrd-valmark-finra/
Sometime in 2012, Houston Byrd Jr. engaged Wayne Farnsworth, Jr., Brad D. Farnsworth, and Valmark Securities, Inc. to provide him with financial advice and investment services; and in furtherance of that relationship, Byrd wound up purchasing an AIG variable annuity in his Individual Retirement Account. Sadly, the relationship among the parties became contentious and on April 28, 2017, Byrd was informed that no further investments services would be rendered to him and, in essence: Take your business elsewhere. That elsewhere was FINRA's Ombudsman's Office and federal court.