Securities Industry Commentator by Bill Singer Esq

FINRA Arbitrators Hit Citigroup With $1.4 Million Damages For Discrimination, Harassment, and Retaliation (BrokeAndBroker.com Blog)

Johns Creek man pleads guilty to defrauding elderly man (DOJ Release)

Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation / Largest Penalty Ever Imposed by SEC Against an Audit Firm (SEC Release)

SEC Charges Canadian Public Company and Its CEO in Fraudulent Microcap Scheme (SEC Release)

FINRA Fines and Suspends Former UBS for Rock Salt 

In the Matter of Patrick Reid Murray, Respondent (FINRA AWC)

Edelman Financial Goes After Former Employee in Federal Court (BrokeAndBroker.com Blog)

[I]n 2016, Choukri met the victim, then 79 years old, at a fitness facility in Alpharetta, Georgia. Choukri cultivated a close relationship with the elderly victim to gain his trust.  Choukri convinced the victim to invest almost $650,000 in his music management company.  Choukri convinced the victim that the investment carried no risk and was guaranteed to earn a return. 

Specifically, Choukri promised that the victim would be compensated the full amount of any investment, plus interest, and even told the victim that he would guarantee him a $1,000,000 return.  Choukri did not tell the victim that the money would be used to fund Choukri's lifestyle. 

Instead of using the money as an investment in a music business, Choukri used the victim's money largely on Choukri's own personal expenses, including, among other things, Choukri's activities of daily living (e.g., fast food, gas, and uber), payments for his daughter's college tuition and sorority expenses, dental work for his girlfriend, payments to his girlfriend for tutoring and babysitting, and repayment of a personal loan.  Choukri also transferred a significant amount of the victim's money to his children's accounts and withdrew thousands of dollars in cash.  Notably, Choukri's accounts show that almost all of Choukri's income in 2016 and 2017 was from the victim. 

EY admits that, over multiple years, a significant number of EY audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, including ones designed to ensure that accountants can properly evaluate whether clients' financial statements comply with Generally Accepted Accounting Principles.

EY further admits that during the Enforcement Division's investigation of potential cheating at the firm, EY made a submission conveying to the Division that EY did not have current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam. EY also admits that it did not correct its submission even after it launched an internal investigation into cheating on CPA ethics and other exams and confirmed there had been cheating, and even after its senior lawyers discussed the matter with members of the firm's senior management. And as the Order finds, EY did not cooperate in the SEC's investigation regarding its materially misleading submission.

In addition to paying a $100 million penalty, the Order requires EY to engage in extensive undertakings, including retaining two separate independent consultants to help remediate its deficiencies. One consultant will review the firm's policies and procedures relating to ethics and integrity. The other will review EY's conduct regarding its disclosure failures, including whether any EY employees contributed to the firm's failure to correct its misleading submission.

The SEC's complaint alleges that Moynes was the President, CEO and Director of two small and thinly traded companies, Formcap Corporation and Digatrade, whose stock was publicly traded in the U.S. securities markets. According to the complaint, Moynes used foreign nominee companies to hold stock in these microcap companies, thus concealing his ownership. The complaint alleges that he and his associates generated demand for his stock by paying promoters to tout the stock and then secretly sold his stock into that demand, generating substantial illicit profits from unsuspecting investors.

Moynes allegedly violated the U.S. securities laws because he defrauded investors by concealing information about his ownership and control over the stock he was selling. Moynes allegedly signed numerous filings with the SEC that contained misstatements about his ownership of Digatrade shares. Moynes allegedly misled investors, brokers, and transfer agents (companies that maintain records of stock ownership) in order to convince these parties that his stock shares were eligible for trading in the public markets. The complaint alleges that, as a result of Moynes' deceptive conduct, investors buying the stock he sold were deprived of important information-that the stock they purchased was being dumped by the President and majority shareholder of the company.

In March 2018, Murray and two other individuals established a company called Integrity Salt, LLC (Integrity) to buy and sell rock salt by filing articles of organization with the Ohio Secretary of State. Murray made capital contributions to Integrity and made at least one vendor payment on behalf of the company by wiring more than a million dollars from his personal account directly to the vendor. Murray also earned approximately $78,704 in compensation from his Integrity-related activities. Murray did not provide prior written notice to or obtain UBS's approval before commencing his outside activities with Integrity. In July 2018, Murray also inaccurately certified that he was in compliance with the firm's WSPs relating to outside business activities. 

Therefore, Murray violated FINRA Rules 3270 and 2010.

In a Uniform Termination Notice for Securities Industry Registration (Form US) dated October 15, 2021, UBS reported that Murray had been discharged after a firm review determined that he exceeded the approved scope of an outside business activity. 

• Securities Industry Commentator
• Bill Singer