Securities Industry Commentator by Bill Singer Esq

How Many FINRA Enforcement Lawyers Does It Take To Prosecute a Default Case? (BrokeAndBroker.com Blog)

SEC Obtains Partial Judgment Against Wisconsin Investment Adviser Charged with Defrauding Clients (SEC Release)

FINRA Arbitration Panel Awards Intellivest Services Damages in Raiding Case Against Growth Capital Services

In the Matter of the Arbitration Between Intellivest Securities, Inc., Claimant, v. Growth Capital Services, Inc., Respondent (FINRA Arbitration Award)

FINRA Arbitration Dings Robinhood Over Trading Restrictions on Stocks

In the Matter of the Arbitration Between Jose Batista, Claimant, v. Robinhood Financial, LLC, Robinhood Securities, LLC, and Robinhood Markets, Inc. (FINRA Arbitration Award)

Everett Man Charged with Securities Fraud (DOJ Release)

SEC Awards About $2.6 Million to Whistleblower 

Order Determining Whistleblower Award Claim

SEC Awards About $1.5 Million to Whistleblower 

Order Determining Whistleblower Award Claim

[S]hillin, while acting as an investment adviser, fabricated documents and made misrepresentations to clients, many of whom were elderly. As alleged, Shillin misrepresented that certain clients had successfully subscribed for IPO or pre-IPO shares in high-profile companies when they had not, and lied to clients about the true value of their investment portfolios. The complaint alleged that Shillin encouraged several advisory clients to roll over their existing life insurance policies into new policies, which caused certain clients to sell securities in order to pay premiums for policies that were non-existent or had far fewer benefits than Shillin claimed. Finally, the complaint alleged that Shillin received hundreds of thousands of dollars in ill-gotten gains as a result of his fraudulent conduct.

The SEC's complaint charged Shillin with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. Without admitting or denying the SEC's allegations, Shillin consented to the entry of a judgment permanently enjoining him from violating these provisions. In addition, the judgment bars Shillin from acting as an officer or director of a public company and orders him to pay disgorgement, prejudgment interest, and a civil penalty in amounts to be determined by the court at a later date.

In a separate proceeding, based on the entry of the consent judgment and an order previously issued by the Wisconsin Department of Financial Institutions - Division of Securities, on January 7, 2022, the SEC issued an order permanently barring Shillin from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.

[T]he causes of action relate to Claimant's allegation that 

Respondent wrongfully raided Claimant, resulting in the abrupt resignation of all four of 

Claimant's registered representatives. Claimant further alleges that because of Respondent's 

raid and subsequent interference with its clients, it was forced to cease virtually all its business 

operations.

The causes of action relate to Respondents placing trade restrictions on numerous stocks on January 28, 2021, including, but not limited to "KOSS" and "EXPR" on its trading platforms in the midst of an unprecedented stock rise.

[E]sposito served as officer and director of Code2Action, Inc., a purported mobile marketing firm. Between August 2019 and February 2020, Esposito allegedly sold company shares to existing shareholders at sub-penny prices based on material misstatements and omissions and then misappropriated much of the proceeds. Specifically, it is alleged that Esposito deliberately misled prospective investors about, among other things, Code2Action's plan and ability to complete a reverse merger, which Esposito touted would enable the investors to sell their shares at a profit. It is further alleged that Esposito misappropriated over $57,000 to pay his personal expenses and failed to disclose to prospective investors, among other things, that the U.S. Securities and Exchange Commission had previously obtained a final judgment against him for committing securities fraud and barred him from certain securities-related activities. 

[C]laimant initially reported his/her concerns internally before providing information to Commission staff that significantly contributed to an existing investigation. Claimant revealed misconduct of which Commission staff were not aware, and Claimant's information helped Commission staff develop an efficient investigative plan to discover the full extent of the wrongdoing. Claimant also communicated with the staff over the course of the investigation and identified potential witnesses. Claimant's information and assistance was particularly significant in that it helped Commission staff obtain evidence of wrongdoing that was occurring abroad, which would have been difficult to acquire in the absence of Claimant's information and cooperation. 

[C]laimants 1 and 2 voluntarily provided original information to the Commission that led to the successful enforcement of the Covered Action. . . . Claimants 1 and 2 provided substantial ongoing assistance throughout the course of the investigation, providing several interviews and consulting telephonically with staff via counsel on numerous occasions, including before and after witness testimony of key witnesses. . . .

• Securities Industry Commentator
• Bill Singer