The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
September 1, 2021
SEC Charges Recidivist California Investment Adviser with Fraud and Breach of Fiduciary Duty (SEC Release)SEC Obtains Emergency Relief, Charges Couple Who Operated $18 Million Ponzi scheme (SEC Release)SEC Obtains Final Judgment Against Investment Adviser Charged with Fraud (SEC Release)UPDATE: If You Didn't Know But Now Do. If You Hadn't Told FINRA But Did. If You Ask For A Stay But the SEC Doesn't. (BrokeAndBroker.com Blog)
FINRA Fines and Suspends Rep Over False Attestations Involving an Elderly Widow's Beneficiary Designation (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/6037/finra-widow-elderly/
When entering into a settlement of allegations of regulatory conduct with FINRA, respondents agree to the imposition of sanctions subject to the reservation "without admitting or denying" the allegations in the Complaint. That's a big concession by a regulator. Unfortunately, FINRA isn't policing the enforcement of its settlements because some respondents seem to be denying their misconduct or raising questions about it. See a recent FINRA regulatory settlement for one such scenario.
SEC Charges Recidivist California Investment Adviser with Fraud and Breach of Fiduciary Duty (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25189.htm
https://www.sec.gov/litigation/complaints/2021/comp25189.pdf, The SEC charged Tellone Management Group, Inc. ("TMG") and its President Dean Tellone with violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 207 of the Investment Advisers Act of 1940; and the Complaint further charges TMG with violating, and Tellone with aiding and abetting TMG's violations of, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Also, the Complaint; charges TMG's vice president of investments Steven Wolfe with aiding and abetting TMG and Tellone's violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act; and charges Wolfe's friend, Robert Gumerman, with violating Sections 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder.
Without admitting or denying the allegations in the complaint, Gumerman has consented to the entry of a final judgment, subject to court approval, permanently enjoining him from violating the antifraud provisions of the federal securities laws.
As alleged in part in the SEC Release:
[F]rom 2015 through the present, Tellone and TMG concealed material information from TMG's mortgage fund investors, many of whom were advisory clients, and from two successive audit firms in order to hide a significant loss in the mortgage fund. The complaint alleges that Tellone instructed Gumerman to mislead the auditors about the status of a $1 million loan the fund made to Gumerman and his wife that had been discharged in bankruptcy proceedings. As alleged, by lying to the auditors and hiding the loss, Tellone was able to inflate the mortgage fund's reported returns. The complaint also alleges that as part of the scheme, Tellone and Gumerman entered into a sham transaction where they purportedly restructured the discharged loan but entered into a secret side deal agreeing to write off the restructured loan. According to the complaint, the side deal provided other favorable terms for the Gumermans at the expense of the mortgage fund and its investors, and rendered the mortgage fund's financial statements, offering documents, and information within its Form ADVs materially misleading. The complaint further alleges that Wolfe aided and abetted the scheme by knowingly providing misleading information to the mortgage fund's auditors.
https://www.sec.gov/news/press-release/2021-170
In a Complaint filed in the United States District court for the District of Minnesota,
https://www.sec.gov/litigation/complaints/2021/comp-pr2021-170.pdf, the SEC charged Jason Dodd Bullard, Angela Romero-Bullard, and Bullard Enterprises LLC with violating the antifraud provisions of the federal securities laws. The Court granted a temporary restraining order and an asset freeze. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2021/comp-pr2021-170.pdf, the SEC charged Jason Dodd Bullard, Angela Romero-Bullard, and Bullard Enterprises LLC with violating the antifraud provisions of the federal securities laws. The Court granted a temporary restraining order and an asset freeze. As alleged in part in the SEC Release:
[F]rom at least 2007 to 2021, the defendants raised approximately $17.6 million from as many as 200 investors to invest in Bullard Enterprises' purported Flagship and Platinum Funds. Bullard and Romero-Bullard allegedly told investors - most of whom were friends and family, including many elderly retirees - that their investments would be used to trade foreign currencies, and sent investors account statements showing that their accounts were increasing in value. In reality, according to the complaint, Bullard Enterprises stopped trading in foreign currencies in 2015, and the defendants simply used new investor money to pay purported "returns" to existing investors. Also according to the complaint, Bullard and Romero-Bullard misappropriated investors' money to support other businesses they owned, including a horse racing stable, limousine service, and health and fitness studio.
https://www.sec.gov/litigation/litreleases/2021/lr25190.htm
In a Complaint filed in the United States District Court for the Central District of California, the SEC alleged that Steven Fitzgerald Brown, the Chief Executive Officer/President/Sole Owner/Director of Alpha Trade with engaging in a Ponzi-like scheme using Alpha Trade Analytics, Inc.'s investment fund and that Brown, as investment adviser to the fund, misappropriated or misused investor funds for his own benefit. The Court entered final judgment on consent against Brown
https://www.sec.gov/litigation/litreleases/2021/judgment25190.pdf whereby he was permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder; and, further, he was ordered to pay disgorgement of $2,613,346 plus prejudgment interest of $65,833, which is deemed satisfied by the criminal restitution order. In a parallel criminal action, Brown pled guilty to wire fraud, and he was sentenced to 51 months in prison plus three years of supervised release, and ordered to pay restitution of $3,313,346 to his victims.
https://www.sec.gov/litigation/litreleases/2021/judgment25190.pdf whereby he was permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder; and, further, he was ordered to pay disgorgement of $2,613,346 plus prejudgment interest of $65,833, which is deemed satisfied by the criminal restitution order. In a parallel criminal action, Brown pled guilty to wire fraud, and he was sentenced to 51 months in prison plus three years of supervised release, and ordered to pay restitution of $3,313,346 to his victims.
https://www.finra.org/sites/default/files/fda_documents/2021072190201
%20John%20Matthew%20Izzo%20CRD%206339734%20AWC%20sl.pdf
%20John%20Matthew%20Izzo%20CRD%206339734%20AWC%20sl.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, John Matthew Izzo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that John Matthew Izzo registered from February 2015 to October 2019 with Allstate Financial Services, LLC. In accordance with the terms of the AWC, FINRA imposed upon Anderson a $5,000 fine and a two-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:
In 2013, Izzo established Elite Agency LLC (Elite) via filing with the New York State Division of Corporations, and was a co-owner and member of that company. When Izzo subsequently became associated with Allstate Financial in February 2015, he did not disclose his outside business activity with Elite to the firm. Through Elite, Izzo engaged in insurance-related outside business activities until his termination from Allstate Financial in October 2019. Izzo did not disclose these activities to the firm, or receive approval to engage in them. Izzo received over $250,000 in compensation from Elite Agency LLC. In addition, during the relevant period, Izzo falsely responded "no" in five annual compliance questionnaires from 2015 to 2019 to the question of whether he had accepted compensation from any entity that had not been previously disclosed on the firm's outside business activities questionnaire.
By engaging in an outside business activity without providing prior written notice to his firm, Izzo violated FINRA Rules 3270 and 2010.
https://www.finra.org/sites/default/files/fda_documents/2018058278601
%20Joseph%20A.%20Lianzo%20CRD%204516842%20AWC%20va.pdf
%20Joseph%20A.%20Lianzo%20CRD%204516842%20AWC%20va.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Joseph A. Lianzo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Lianzo was first registered in 2002, and from September 2015 through April 2017, he was registered with Laidlaw & Company (UK) Ltd; and, thereafter, since September 2017, with SW Financial. In accordance with the terms of the AWC, FINRA imposed upon Anderson an eight-month suspension from associating with any FINRA member in all capacities. No fine was imposed based upon Lianzo's financial condition. As alleged in part in the "Overview" of the AWC:
Between March 2016 and November 2019, Lianzo excessively traded four customers' accounts in violation of FINRA Rules 2111 and 2010. Lianzo also placed 13 unauthorized transactions in accounts of two of those four customers, in violation of FINRA Rule 2010.
http://www.brokeandbroker.com/6028/finra-sec-giles/
In June 2021, in the first iteration of this article, we noted that among the mysteries of the Universe is whether a revocation of a license is the same as a bar of a license. On top of that puzzler, if something happens but you didn't know about it at the time but you eventually learn about it, does that mean you had failed to timely report what you didn't know had happened but now do? Then, we are asked to ponder the ethical and legal implications of whether the SEC should stay a determination by FINRA that someone has become statutorily disqualified after that same individual voluntarily reported the facts that prompted FINRA's determination. In August 2021, the SEC asked for additional briefing.