Securities Industry Commentator by Bill Singer Esq

CFTC Awards Largest Single Whistleblower Award of $200 Million But With One Commissioner's Dissent (BrokeAndBroker.com Blog)

Suburban Chicago Woman Guilty of Insider Trading (DOJ Release)

Coolidge Real Estate Investor Convicted of Wire Fraud and Money Laundering (DOJ Release)

Chicago Investment Manager Sentenced to 17 Years in Federal Prison for Swindling $10 Million From Clients and Lenders (DOJ Release)

CEO Of East Bay-Based Internet Companies Marketing Child-Friendly Services Indicted On Wire Fraud And Securities Fraud Charges / Alan Anderson Arrested In Connection With Alleged Scheme To Raise Money By Creating False Impression of Profitability and Sending False Contracts to Investors (DOJ Release)

Tulsa Man Pleads Guilty to Defrauding Investor and Banks of Millions of Dollars (DOJ Release)

Former CEO, CFO, And VP Of Email Security Company Charged With $50 Million Fraud Scheme / Robert Bernardi, Nihat Cardak, and Sunil Chandra Raised Millions of Dollars from Investors and Lenders by Using Fabricated Documents and Impersonating a Purported Customer, Auditor, and Lawyer (DOJ Release)

SEC Charges Former CEO and CFO of Software Company with Multimillion Dollar Fraud (SEC Release)

Former Lawyer Agrees to Plead Guilty to Conning Clients via Sham Court Documents Containing Forged Judge Signatures (DOJ Release)

Credit Suisse to Pay Nearly $475 Million to U.S. and U.K. Authorities to Resolve Charges in Connection with Mozambican Bond Offerings / VTB Capital Also Agrees to Settlement with SEC for Role in Misleading Investors (SEC Release)

In the Matter of Credit Suisse (Statement by SEC Commissioner Hester M. Peirce)

Remarks at the PRI/LSEG Investor Action on Climate Webinar by SEC Commissioner Allison Herren Lee

FINRA Fines and Suspends Rep for Seeking Economic Injury Disaster Loan

In the Matter of Doli Kumar, Respondent (FINRA AWC)

There Was Little She Could Do -- So Why Was This BOM's Record Marked Up? (BrokeAndBroker.com Blog)

After Morgan Stanley Raised Serious Questions in Failed TRO Against Former Employee, The Parties Stipulate to Preliminary Injunction (BrokeAndBroker.com Blog)

Federal Circuit Court Sustains Registered Rep's Conviction and Sentence of 90 Months (BrokeAndBroker.com Blog)

Grevas admitted in a plea agreement that in 2019 she made $286,960 in illegal profits from the purchase and sale of securities in a Washington state-based pharmaceutical company, which was a target for acquisition and later acquired by an overseas-based pharmaceutical company that had an office in Deerfield, Ill., and employed Grevas's husband.  Grevas used material, non-public information about the expected acquisition to purchase shares in the Washington company ahead of a public announcement of the acquisition on Sept. 16, 2019.  After the announcement, the Washington company's stock price increased and Grevas sold her shares for the profit, the plea agreement states.

[K]elley defrauded a family friend out of the friend's entire $185,000 in savings. Kelley, a former real estate agent, convinced the victim to invest in a real estate project and send additional money for a short-term loan. Instead of using the money as promised, Kelley used all of the victim's savings to pay off her own debts and then strung the victim along for months with a series of lies and excuses about how the money was spent and when the victim would get it back. Other evidence showed that Kelley defrauded another family friend out of $647,000 just a few years earlier using similar tactics.

[F]rom 2006 to 2017, Baldwin exaggerated his financial success and professional connections to fraudulently obtain more than $11 million from at least 24 investors and lenders.  Baldwin falsely claimed that their funds would be invested in stocks and other investment products, when in reality he spent much of the money for his personal benefit, including jewelry, tuition, and international travel.

Baldwin also deceived investors and lenders by misrepresenting and minimizing the serious disciplinary actions taken against him by regulators.  The regulatory actions included the revocation of his certifications with the Financial Industry Regulatory Authority in 2009, and a permanent prohibition from offering securities sales or investment advice, which the State of Illinois imposed in 2013.

used misrepresentations to solicit investments for the three businesses.  According to the indictment, Anderson owned and controlled Imbee, Inc., a Delaware corporation based in Walnut Creek marketed as a child-friendly social media platform; Fanlala, a California corporation marketed as a service providing internet-based music streaming for children; and Fruit Punch, a California corporation marketed as providing music-streaming service for children.  The indictment alleges that beginning as early as April of 2010 through May of 2019, Anderson raised money for his companies by making false representations and creating false documents to support his bogus claims.  For example, the indictment alleges Anderson created fraudulent income statements and profit and loss statements and misrepresented the companies' profitability to investors and potential investors; that Anderson created and altered contracts to represent falsely that one or more of his companies would be acquired by larger companies; and that Anderson created and altered contracts to make fraudulent claims that his companies created partnerships with other existing companies.  In addition, the indictment describes how Anderson emailed an investor to falsely claim Imbee was worth $21.6 million and that the investor owned 70% of the company.    

[M]ulder admitted that beginning in 2000 and continuing through 2017, he received numerous checks totaling approximately $4.5 million from the victim, who was a local businessman and friend to Mulder. Mulder advised the victim to create a trust for his special needs son and for which Mulder would be the trustee and have complete discretion and control. Mulder told the victim that he would prudently invest the funds on the son's behalf. Instead, Mulder used the funds for his own personal expenses and enrichment.

Mulder admitted that in December 2015, he fraudulently received a check from the victim in the amount of $142,500 and deposited funds from the check in the amount of $83,378.54 into his personal account, which he later used on a personal investment in generators in Missouri.

Further, Mulder admitted that he lied about his assets and submitted fabricated documents to obtain loans from Oklahoma banks in order to support a lifestyle he couldn't afford on his own.

According to the indictment, Mulder, as part of his scheme, misrepresented himself as worth millions to friends. Mulder told several individuals that a wealthy Missouri widow had left him over $100 million in a blind trust in appreciation for his services as an insurance salesman for the widow. In another story, he said he was the beneficiary of a different blind trust worth hundreds of millions of dollars from his father. The government alleged that Mulder convinced his friends that if they pooled their investments with his fortune, they could grow their money faster. To cover his tracks, Mulder created a web of convoluted rules and restrictions to keep the victims from seeing the progress of their investments. The government alleged that, in reality, there were no investments. Mulder deposited checks into his personal bank accounts and used the funds to pay off credit card debts and to run a coffee shop chain. He also allegedly moved money between more than 60 bank accounts in order to make it difficult for the investors and law enforcement to follow the trail of money.

From in or about 2016 through at least in or about 2019, GigaTrust was a private company headquartered in Virginia that purported to be a market-leading provider of cloud-based content security solutions.  BERNARDI founded GigaTrust and served as its CEO, while CARDAK and CHANDRA were GigaTrust's CFO and Vice President of Business Development, respectively.  The defendants devised a scheme to defraud investors and lenders by (a) fabricating and disseminating false and misleading bank account statements that overstated GigaTrust's cash deposits; (b) fabricating and disseminating false and misleading audit materials that purported to have been issued by GigaTrust's auditors and overstated GigaTrust's performance; (c) forging and disseminating a false and misleading letter purporting to be from GigaTrust's New York-based counsel; and (d) impersonating or causing others to impersonate a purported customer and auditor of GigaTrust on telephone calls with a prospective lender. 

Specifically, BERNARDI sent fabricated audit materials to a New York-based investment firm, and BERNARDI and CARDAK used fabricated bank statements to obtain multiple rounds of loans and investments for GigaTrust, worth millions of dollars.  After a New York-based bank ("Bank-1"), which had loaned GigaTrust $25 million, declared that GigaTrust had defaulted on the terms of its loan agreement, BERNARDI and CARDAK induced additional investments in GigaTrust through, among other things, forging a letter purporting to be from GigaTrust's New-York based counsel.  Shortly thereafter, while negotiating another $25 million deal with a lender ("Lender-1"), BERNARDI and CARDAK devised a scheme to impersonate a GigaTrust customer and auditor on requested diligence calls, which induced Lender-1 to make a $25 million loan to GigaTrust.  BERNARDI recruited CHANDRA to pose as one of GigaTrust's alleged customers on a call with Lender-1.  BERNARDI and CARDAK also fabricated bank statements and sent them to Lender-1 right before closing the $25 million deal. 

GigaTrust filed for Chapter 7 bankruptcy protection in the District of Delaware on or about November 27, 2019.

The Securities and Exchange Commission charged Robert Bernardi, founder and former CEO of GigaMedia Access Corporation (Giga), Nihat Cardak, former CFO of Giga, and Sunil Chandra, Giga's former VP of Business Development, with fraudulently raising tens of millions from investors.

The SEC's complaint alleges that Bernardi and Cardak told potential investors and lenders that Giga had revenues over $50 million, a solid balance sheet with at least $18 million in available cash, and a promising new product that already had many customers. In reality, according to the complaint, Giga had revenues of a little over $1 million, less than $1 million in available cash, and far fewer customers than it represented to investors. The complaint alleges that Bernardi and Cardak fabricated documents to support their false statements. The complaint further alleges that after an investor requested to speak with a Giga customer, Bernardi arranged for the investor to speak with Chandra, who pretended to be an employee at a company Bernardi claimed was a Giga customer. Bernardi and Cardak, with Chandra's assistance, allegedly raised more than $37 million in debt and equity from investors through these false representations. A portion of the funds allegedly went to Bernardi's children.

Elstein was a licensed California attorney from December 1994 until the State Bar of California ordered him inactive in March 2019. According to his plea agreement, from June 2015 to July 2018, Elstein engaged in a scheme to defraud his clients by claiming he obtained favorable legal resolutions for them, when in fact the favorable resolutions had never been obtained. In many cases, Elstein never initiated any legal action. Elstein also admitted to misappropriating funds by informing victims their fees were going into his client trust account, when in fact he directed them to deposit money into his personal bank account.

For example, in June 2016, Elstein falsely informed a corporate client that it had won a $52 million default judgment. He emailed the victim-client a fake court order that contained a judge's forged signature. Having never actually filed a lawsuit on his client's behalf, Elstein further misrepresented that the case was improperly under seal due to a United States Department of Justice investigation. To further his fraudulent scheme, Elstein presented his clients with a fake settlement agreement between the client and the United States Attorney's Office for the Eastern District of California. It was not until the company reached out to that United States Attorney's Office to authenticate the settlement agreement that it discovered that the agreement was a forgery.

Elstein also admitted to fabricating depositions in a federal case in Washington state in September 2015. Because these depositions were fake, no one appeared for them. Nonetheless, Elstein had a court stenographer present and made a formal record of the nonappearances. Elstein also billed the client for attending the fake depositions and his travel expenses to Seattle.

Elstein also falsely told the victim that he had obtained a $4.25 million judgment in the victim's favor and provided the victim with a fake court order containing the forged signature of a judge. When the victim traveled to Seattle to collect the judgment, he was informed by the court that no such case existed.

In total, Elstein's conduct resulted in losses of at least $358,855 to his victims.

[A]ccording to the SEC's order, the second offering as structured by VTB Capital and Credit Suisse allowed investors to exchange their notes in an earlier bond offering for new sovereign bonds issued directly by the government of Mozambique. But the SEC found that the offering materials distributed and marketed by Credit Suisse and VTB Capital failed to disclose the true nature of Mozambique's debt and the high risk of default on the bonds. The offering materials further failed to disclose Credit Suisse's discovery that significant funds from the earlier offering had been diverted away from the intended use of proceeds that was disclosed to investors. Mozambique later defaulted on the financings after the full extent of "secret debt" was revealed.

The SEC's order against Credit Suisse finds that it violated antifraud provisions as well as internal accounting controls and books and records provisions of the federal securities laws.  Credit Suisse agreed to pay disgorgement and interest totaling more than $34 million and a penalty of $65 million to the SEC. As part of coordinated resolutions, the U.S. Department of Justice imposed a $247 million criminal fine, with Credit Suisse paying, after crediting, $175 million, and Credit Suisse also agreed to pay over $200 million in a penalty as part of a settled action with the United Kingdom's Financial Conduct Authority.

VTB Capital consented to an SEC order finding that it violated negligence-based antifraud provisions of the federal securities laws. Without admitting or denying the findings, VTB Capital agreed to pay over $2.4 million in disgorgement and interest along with a $4 million penalty.

On October 19, 2021, Credit Suisse Securities (Europe) Limited ("CSSEL") entered a guilty plea to one count of criminal conspiracy with the U.S. Department of Justice related to defrauding U.S. and international investors in the financing of an $850 million loan for a tuna fishing project in Mozambique.[1] One consequence of CSSEL's guilty plea is the triggering of section 9(a) of the Investment Company Act of 1940, which, absent Commission action, automatically disqualifies CSSEL affiliates from, among other things, serving as investment advisers or principal underwriters to certain types of investment companies.[2] The affiliated investment fund service providers, who are applicants for relief here, were not involved in the actions leading to CSSEL's guilty plea, and funds they serve are not alleged to have been harmed by CSSEL's conduct. Disqualifying these affiliates from continuing to serve as advisers, subadvisers, and underwriters for nearly sixty funds would be unwarranted and, more importantly, would harm the funds and their shareholders. Accordingly, I support the Commission's issuance of a temporary order and notice of application for a permanent order exempting named Credit Suisse entities from the provisions of section 9(a). My support, however, is not as enthusiastic as it might be.

Section 9(c) allows the Commission, under the appropriate circumstances, to grant relief from the draconian consequences of section 9(a) "either unconditionally or on an appropriate temporary or other conditional basis."[3] In this case, rather than simply grant the Credit Suisse affiliates the necessary relief, the Commission has chosen to impose a number of needless conditions upon the affiliates, with one potentially being deleterious. Had the Commission limited its conditions to prohibiting the Credit Suisse affiliates from employing individuals linked to CSSEL's criminal transgressions, I could have supported this action without objection because it would serve the statutory purpose of protecting the funds and fund investors. Unfortunately, the Commission has decided to condition this needed relief on certifications and reports that serve no discernible purpose.

In what way, for instance, will the Commission's oversight of fund service providers be enhanced by requiring Credit Suisse to submit to the Chief Counsels of the Commission's Divisions of Investment Management and Enforcement reports detailing the organization's progress in implementing the Transparent Lending Covenant? Providing greater transparency in lending arrangements susceptible to misconduct is a commendable goal, but how will conditioning 9(c) relief for investment advisers not involved in any wrongdoing upon the submission of three successive annual reports help achieve this goal?

More troubling is the requirement that Credit Suisse's Chief Compliance Officer ("CCO") submit a series of annual certifications attesting to Credit Suisse's adherence to its plea and deferred prosecution agreements with the Justice Department, as well as the terms of the Commission's order. I have spoken publicly of my concern that we may be placing undue pressures on CCOs.[4] Mandating certifications of the sort found in this order can only increase CCO anxiety over heightened personal liability. If the Commission has concerns that the applicants are not meeting their obligations, then the proper response is a visit from an exam team, not the approach we have taken here.

The Applicants had little choice but to agree to whatever conditions the Commission imposed. The alternative would have caused the funds they serve to find new service providers, an outcome that would have been very disruptive and costly for those funds and their shareholders. I too have little choice but to support this order, given the severe consequences of section 9(a). I hope that when faced with a similar application in the future, we will manage to display greater forbearance and impose only such conditions as are necessary to protect the funds at issue, which, after all, is the whole purpose of section 9.

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[1] See U.S. Department of Justice, "Credit Suisse Resolves Fraudulent Mozambique Loan Case in $547 Million Coordinated Global Resolution," October 19, 2021, [Press release], https://www.justice.gov/opa/pr/credit-suisse-resolves-fraudulent-mozambique-loan-case-547-million-coordinated-global. The SEC brought and settled a related action with Credit Suisse, which I supported. This action did not involve the funds or their Credit Suisse service providers. See U.S. Securities and Exchange Commission, "Credit Suisse to Pay Nearly $475 Million to U.S. and U.K. Authorities to Resolve Charges in Connection with Mozambican Bond Offerings," October 19, 2021 [Press release], https://www.sec.gov/news/press-release/2021-213.

[2] 15 U.S.C. 80a-9(a).

[3] 15 U.S.C. 80a-9(c).

[4] Peirce, H.M. (2020). When the Nail Fails - Remarks before the National Society of Compliance Professionals [Speech transcript]. https://www.sec.gov/news/speech/peirce-nscp-2020-10-19.

Good morning or good afternoon depending on where you are. I want to start by thanking Principles for Responsible Investment and the London Stock Exchange Group for inviting me to speak today, and for holding this event. I also need to share the standard, but important, disclaimer that the views I express are my own and not those of the Commission or its staff.

This type of dialogue among market participants is a critical component of the larger global effort to come together to address the risk that climate change poses to capital markets and the global economy.

As we move forward on climate initiatives, we must take an approach that is both collaborative and comprehensive. Investors, issuers, standard setters, academics, regulators - we all have a role. At the SEC, our focus is on capital markets - protecting investors, maintaining fair, orderly, and efficient markets, and promoting capital formation. We don't set emissions standards or net zero targets, we don't implement carbon pricing, or otherwise shape energy or environmental policy. But we must work hand-in-hand with our colleagues all across government and in the private sector as we fulfill our mission.

One very important role the SEC serves is to help ensure that decision-useful information gets into the markets in a timely manner by, among other things, setting public company disclosure standards. As most of you know, our staff is actively engaged now in assessing how we can best facilitate the disclosure of consistent, comparable, and reliable climate-related information.

Fortunately, as we consider a potential climate disclosure proposal, we don't have to start from scratch. Far from it. The quantity and quality of climate disclosure has increased significantly in the last decade or so, in large part because of the efforts of investors in seeking that disclosure, issuers in responding to investor demand, and voluntary framework and standard setters - like PRI and others - in their efforts to facilitate that interchange. We are fortunate that we can build from these efforts. This work has evolved significantly, and has now reached a point at which regulatory involvement can truly help to optimize results.

Because of this work, regulators can now pick up the baton to help achieve what a voluntary system alone cannot - that is, consistent, comparable, and reliable disclosure. Disclosure that works for investors, provides certainty for issuers, and provides fundamentally important transparency around the systemic risk posed by climate change.

As we move forward with regulatory efforts, it's important that we continue to hear from market participants and the public, and continue to leverage the expertise and hard work that's already been done.

That is, in part, why I sought public comment earlier this year on a potential climate disclosure proposal by the SEC. At that time, we already had significant input from investors and others urging us to act on climate disclosure, highlighting that true modernization of our disclosure rules must encompass climate risk - a defining feature of modern markets.[1]

Because of the importance of this subject matter, because of its complexity, and because of the diversity of views, I wanted to advance the dialogue by opening a public comment file, to move from the question of if, to the question of how, we can best elicit climate-related disclosures. I have been pleased to see that we have received thousands of letters in response to that request.[2] As a result, we have a wide range of perspectives, data, and expertise to inform the agency's staff, and to help us move swiftly to develop a rule proposal.

If the Commission does issue a proposal, which our Chair has indicated is forthcoming,[3] there will be a further comment period to come during which the public can react to the specifics of the proposal and help inform any final rule. I note this to emphasize the transparent and collaborative nature of this process. At every step along the way, the agency has and will engage with market participants and the public to ensure that we are proceeding carefully, deliberatively, and based on the best available data.

But the collaboration doesn't stop there. Climate is of course a global challenge that demands a global solution. That's why we must seek ways to collaborate across jurisdictional boundaries to promote consistency in climate-related disclosure. An important and promising international effort is the IFRS Foundation's work on an international sustainability standards board, or the ISSB.[4] The ISSB can hopefully provide an international baseline for sustainability reporting on which individual jurisdictions can build. Such an approach would balance both the need for consistency across borders with the particular needs of individual jurisdictions. The SEC, through IOSCO and other international work streams, is engaged in efforts to assist in this work, and I look forward to continued progress on that front.

These cooperative efforts - public and private, domestic and international - are aimed mainly at one goal: to get the data out there. Those who are steering the capital that drives global economies need consistent, comparable, and reliable climate data in order to accurately price risk and efficiently allocate capital.

Let me add this point: markets are central and necessary to climate solutions, but data and greater market transparency alone will not enable capital markets to fully "solve" the problem of climate change.[5] That's because markets are only as reliable as the incentive structure on which they are based. Because of varying estimates around the timeline for some of these risks to materialize, or the so-called "Tragedy of the Horizon,"[6] market forces and incentives may not operate optimally to shift capital today to get us where we need to be tomorrow.

That is in part why numerous market participants - trade groups, bankers, policy-makers, Nobel prize winning economists and others[7] - are of the view that putting a price on carbon through, for example, a carbon tax or other methods of requiring the internalization of climate externalities is key to this effort.

Nevertheless, better data can accomplish a great deal. After all, it's not just investors who will benefit from the information. All policymaking should flow from reliable data as well. The U.S. has now emphasized a "whole of government" approach to climate change, making it a central consideration across the government's domestic and foreign policy.[8] Not only will enhanced climate disclosure inform markets, it can more broadly inform the wider spectrum of climate policymaking - policymaking that deserves incisive, informed, and - importantly - swift attention.

In closing, I think it's important to put the SEC's role within the context of the larger issue. So let me not mince words: climate change presents an existential threat to life on the planet. While it's important to consider this issue, as the SEC does, through the lens of the risks and opportunities in financial markets, there is a level at which that grossly underestimates what is at stake.[9]

Thus I look forward to the continued, collaborative work - globally - of investors, financial institutions, and businesses toward climate solutions. I also look forward to the work of other law and policymakers toward a comprehensive approach to confronting the climate crisis.

Thank you for having me today.

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[1] See, e.g., Sustainability Accounting Standards Board,The State of Disclosure: An Analysis of the Effectiveness of Sustainability Disclosure in SEC Filingsat 4 (2016) ("Despite the fact that sustainability disclosure was a relatively minor topic of discussion in the SEC release, covering about four of its 92 pages, two-thirds of the more than 276 non-form comment letters the Commission received in response addressed sustainability-related concerns. Eighty percent of sustainability-related letters called for improved disclosure of climate related information in SEC filings, with only 10 percent of letters opposing SEC action on the matter."). See alsoComments on Proposed Rule: Modernization of Regulation S-K Items 101, 103, and 105. The Commission received nearly 3,000 comment letters on the proposal, including a campaign that generated the submission of over 2,800 form letters asking for more disclosure on workforce development, climate, and diversity. See also Letter from Cynthia A. Williams and Jill E. Fisch(Oct. 1, 2018) (enclosing a petition for rulemaking to the SEC on standardized disclosure related to environmental, social, and governance ESG issues, signed by investors and organizations representing more than $5 trillion in assets under management).

[2] See Comments on Climate Change Disclosures.

[3] See Gary Gensler, Prepared Remarks Before the Principles for Responsible Investment "Climate and Global Financial Markets" Webinar (July 28, 2021).

[4] See IFRS Foundation, Proposed Targeted Amendments to the IFRS Foundation Constitution to Accommodate an International Sustainability Standards Board to Set IFRS Sustainability Standards, Exposure Draft (Apr. 2021).

[5] See Paul Polman, Why business cannot tackle climate change on its own, Financial Times (Dec. 1, 2019) ("Companies cannot stop runaway climate change alone and not without major reform."); Naomi Oreskes, Without Government, the Marketplace Will Not Solve Climate Change, Scientific American (Dec. 1, 2015) ("In our markets today, people are dumping carbon dioxide into the atmosphere without paying for that privilege. This is a market failure. To correct that failure, carbon emissions must have an associated cost that reflects the toll they take on people and the environment. A price on carbon encourages individuals, innovators and investors to seek alternatives, such as solar and wind power, that do not cause carbon pollution.").

[6] See Mark Carney, Breaking the Tragedy of the Horizon - climate change and financial stability (Sept. 29, 2015) ("The horizon for monetary policy extends out to 2-3 years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle - about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late.").

[7] See, e.g., Managing Climate Risk in the U.S. Financial System, Report of the Climate-Related Market Risk Subcommittee, Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (Sept. 9, 2020) ("Prudent risk management calls for immediately implementing carbon pricing globally to quickly reduce GHG emissions and to try to get the planet to net-zero emissions as soon as possible while ensuring that the costs are shared equitably across society and that the distributional impacts are not regressive."); William Nordhaus, The Climate Club, Foreign Affairs (May/June 2020) (advocating a "focus on a carbon price, a price attached to emissions of carbon dioxide and other greenhouse gases"); David Solomon, Goldman Sachs' commercially driven plan for sustainability, Financial Times (Dec. 15, 2019) ("To give us the best chance of combating climate change, governments must put a price on the cost of carbon, whether through a cap and trade system, a carbon tax or other means. The resulting incentives will channel capital to low carbon solutions and drive innovation."). But see Ben Ho, Time to Give Up on a Carbon Tax?, Columbia Climate School State of the Planet (Apr. 26, 2021) ("A carbon tax on its own isn't even the first best policy option because it doesn't target other externalities that are potentially more important than the direct damage of climate change. In particular it doesn't do enough to encourage the benefits that come when new technologies are invented, such as the innovations that have brought the price of solar down by 90% or more in the past 10-20 years. It also does little to address the infrastructure needed for a low carbon economy - infrastructure like a smarter grid, or a network of electric vehicle charging stations. Perhaps we should be focusing on those market failures first.").

[8] See The White House, Fact Sheet: President Biden Takes Executive Actions to Tackle the Climate Crisis at Home and Abroad, Create Jobs, and Restore Scientific Integrity Across Federal Government (Jan. 27, 2021) ("The order establishes the National Climate Task Force, assembling leaders from across 21 federal agencies and departments to enable a whole-of-government approach to combatting the climate crisis.").

[9] See Sixth Assessment Report of the Intergovernmental Panel on Climate Change (August 2021) ("The scale of recent changes across the climate system as a whole and the present state of many aspects of the climate system are unprecedented over many centuries to many thousands of years."); see also Patrick Bolton, Morgan Despres, Luiz Awazu Pereira da Silva, Frédéric Samama, & Romain Svartzman, Bank for International Settlements, The green swan: Central banking and financial stability in the age of climate change (Jan. 2020) (providing that climate risk "is a new type of systemic risk that involves interacting, nonlinear, fundamentally unpredictable, environmental, social, economic and geopolitical dynamics, which are irreversibly transformed by the growing concentration of greenhouse gases in the atmosphere").

In 2020, as a result of the COVID-19 pandemic, the federal government initiated several programs to assist small businesses, including the Economic Injury Disaster Loan program, which was administered by the SBA. In June 2020, Kumar submitted an application to the SBA for an Economic Injury Disaster Loan, but she did not review the loan program requirements to determine her eligibility prior to submitting her application. Kumar, then a registered representative of Key Investment Services with no disclosed outside business activities, did not operate any business eligible for a small business loan from the SBA. In her application to the SBA, Kumar negligently misrepresented that: she was the owner of a real estate business; and the business had earned revenues and sold goods between January 31, 2019 and January 31, 2020, which was not the ease. Kumar, however, had been working on an e-commerce real estate business concept during this time period, including expending money on business seminars and the creation of a business plan prior to submitting her application, but at the time of her application, the business had not yet commenced operations. 

Based on Kumar's negligent misrepresentations in the loan application, the SBA approved her loan application in the amount of $20,000, and, also on the basis of her misrepresentations, separately granted her a $1,000 Economic Injury Disaster Loan advance, After the SBA approved her loan application, Kumar, for the first time, read the Economic Injury Disaster Loan program requirements and determined that she was not eligible for the program. Accordingly, Kumar withdrew her application and did not sign the loan agreement for the approved $20,000 loan. To date, Kumar has not repaid the $1,000 to the SBA. 

Therefore, Kumar violated FINRA Rule 2010. 

• Securities Industry Commentator
• Bill Singer