Blog Posts Tagged With Financial Institutions and Regulated Entities

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In re LendingClub Asset Management, LLC, f/k/a LC Advisors, LLC, et al. (A.P. Sept. 28, 2018, Settled)

Action against Respondents, an investment adviser, its former CEO, and its former CFO, for alleged Investment Advisers Act violations in connection with the fraudulent use of money from private funds.  According to the SEC, Respondent adviser, through Respondent CEO, caused one of its private funds to purchase interests in risky loans in order to benefit Respondent adviser.  The SEC alleges that these purchases did not comply with the procedures provided in Respondent adviser’s Form ADV. 
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In re Credit Suisse Securities (USA) LLC (A.P. Sept. 28, 2018, Settled)

Action against Respondent, a broker-dealer, for alleged misrepresentations and omissions related to the handling of orders by Respondent’s now defunct Retail Execution Services business.    According to the SEC, despite advertising its access to “dark pool” liquidity in marketing materials, Respondent executed few held orders in “dark pools”.  The SEC further alleges that Respondent failed to disclose that retail customers would not receive price improvement on non-reportable orders and, contrary to claims to customers, Respondent routed
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In re COR Clearing, LLC (A.P. Sept. 28, 2018, Settled)

Action against Respondent, a clearing firm, in connection with alleged failure to file Suspicious Activity Reports (SARs) for sales of penny stock shares. The SEC alleges that some customers of Respondent’s introducing broker-dealers deposited significant amounts of penny stocks, sold them into the market, and withdrew the proceeds from their accounts.  According to the SEC, Respondent did not file SARs with respect to some of these transactions.  Respondent has agreed to pay an $800,000 civil
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In re COR Clearing, LLC (A.P. Sept. 28, 2018, Settled)

Action against Respondent, a clearing firm, in connection with alleged failure to file Suspicious Activity Reports (SARs) for sales of penny stock shares. The SEC alleges that some customers of Respondent’s introducing broker-dealers deposited significant amounts of penny stocks, sold them into the market, and withdrew the proceeds from their accounts. According to the SEC, Respondent did not file SARs with respect to some of these transactions. Respondent has agreed to pay an $800,000 civil
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In re Credit Suisse Securities (USA) LLC (A.P. Sept. 28, 2018, Settled)

Action against Respondent, a broker-dealer, for alleged misrepresentations and omissions related to the handling of orders by Respondent’s now defunct Retail Execution Services business.  According to the SEC, despite advertising its access to “dark pool” liquidity in marketing materials, Respondent executed few held orders in “dark pools”. The SEC further alleges that Respondent failed to disclose that retail customers would not receive price improvement on non-reportable orders and, contrary to claims to customers, Respondent routed
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CFTC v. TFS-ICAP, LLC, et al. (S.D.N.Y. Sept. 28, 2018, Contested)

Action against Defendants, an interdealer broker joint venture, its Global Head of Emerging Markets FX Options, and its CEO, in connection with alleged deception of clients through the use of fake bids, offers, and trades in the forex options market.  The CFTC alleges that senior managers encouraged or knowingly allowed the misconduct to continue and that Defendant CEO knew or had reason to know of the practices but failed to take steps to prevent them.
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In re Michael Leibowitz (A.P. Sept. 28, 2018, Settled)

Action against Respondent, Chairman of the Board of an interdealer foreign exchange options broker, for alleged failure to diligently supervise forex options trades by the emerging options desk.   According to the CFTC, brokers engaged in fake bids, offers, and trades to misrepresent the level of liquidity and encourage customers to trade.  The CFTC further alleges that senior managers had reason to know that this practice was ongoing and that Respondent failed to implement any policies
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CFTC v. EOX Holdings LLC and Andrew Gizienski (S.D.N.Y. Sept. 28, 2018, Contested)

Action against Defendants, an introducing broker and one of its associated persons, for alleged misuse of material nonpublic information related to their customers.  According to the CFTC, Defendant associated person provided a friend with confidential customer information and executed trades for his friend’s account while in possession of that information.  The CFTC also alleges that Defendant broker failed to maintain certain required records, diligently supervise its employees, and institute policies and procedures to monitor trading
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In re LendingClub Asset Management, LLC, f/k/a LC Advisors, LLC, et al. (A.P. Sept. 28, 2018, Settled)

Action against Respondents, an investment adviser, its former CEO, and its former CFO, for alleged Investment Advisers Act violations in connection with the fraudulent use of money from private funds. According to the SEC, Respondent adviser, through Respondent CEO, caused one of its private funds to purchase interests in risky loans in order to benefit Respondent adviser. The SEC alleges that these purchases did not comply with the procedures provided in Respondent adviser’s Form ADV.
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In re Putnam Investment Management, LLC and Zachary Harrison (A.P. Sept. 27, 2018, Settled)

Action against Respondents, an investment adviser and a former portfolio manager and RMBS trader, in connection with alleged preferential treatment of select advisory clients.  According to the SEC, Respondent manager executed prearranged RMBS cross trades with broker-dealers, informing some clients that the securities would be repurchased the next day at a slightly higher price.  The SEC alleges that Respondent manager’s arrangement was preferable for some clients over others and that Respondent adviser failed to supervise
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SEC v. Goldsky Asset Management, LLC and Kenneth Grace (S.D.N.Y. Sept. 27, 2018, Contested)

Action against Defendants, an investment adviser and its owner, for alleged false and misleading statements on its website and in SEC filings.  According to the SEC, Defendant adviser’s hedge fund did not employ an auditor, prime broker, or custodian, despite Defendant adviser’s representations on its Forms ADV.  The SEC also alleges that Defendant adviser falsely represented that it managed more in discretionary assets than it actually did and Defendant adviser’s website misstated its past returns.
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CFTC v. 1pool Ltd. and Patrick Brunner (D.D.C. Sept. 27, 2018, Contested)

Action against Defendants, an online trading platform company and its CEO and owner, in connection with alleged illegal retail commodity transactions, failure to register as a Futures Commission Merchant, and failure to implement procedures to prevent money laundering.  According to the CFTC, Defendants failed to conduct certain transactions in compliance with the Commodity Exchange Act, and Defendant company, through Defendant CEO and others, acted as a Futures Commission Merchant by soliciting or taking orders for
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In re Voya Financial Advisors, Inc. (A.P. Sept. 26, 2018, Settled)

Action against Respondent, a dually registered broker-dealer and investment adviser, in connection with alleged failure to adopt adequate cybersecurity policies and procedures to protect customer information from compromise.  According to the SEC, Respondent provided access to a web portal that contained personal customer information to some of Respondent’s contractors. The SEC alleges that persons impersonating Respondent’s contractors then requested and received password resets for the contractor’s accounts from Respondent’s support line and used those passwords
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In re Peter Grady (A.P. Sept. 26, 2018, Settled); In re Adam Flavin (A.P. Sept. 26, 2018, Settled)

Actions against Respondents, two traders at a commodity merchandising firm, for alleged attempts to manipulate the price of wheat futures and options contracts.  According to the CFTC, Respondents and others attempted to manipulate the price of particular wheat futures and options contracts through the purchase and cancellation of wheat shipping certificates.  The first Respondent trader has agreed to pay a civil penalty of $125,000, and the second Respondent trader has agreed to pay a civil
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In re Kooima Kaemingk, et al. (A.P. Sept. 26, 2018, Settled)

Action against Respondents, a registered introducing broker, its Vice President and co-owner, and its President and co-owner, in connection with Respondent Vice President’s alleged fraud, unauthorized trading, and false and misleading statements to a financial market company; a former employee’s fraud, unauthorized trading, and violation of the financial market company’s position limits in certain futures contracts; and for Respondents’ supervision failures.  Respondents have agreed to pay, jointly and severally, restitution of $11,920,857.50 and a civil
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In re SG Americas Securities, LLC, as successor entity to Newedge USA, LLC (A.P. Sept. 25, 2018, Settled)

Action against Respondent broker-dealer for alleged improper practices involving the pre-release of American Depository Receipts (ADRs).  According to the SEC, Respondent traders acted in violation of depositary agreements by obtaining and lending pre-released ADRs without first taking reasonable steps to determine whether the requisite number of ordinary shares was owned and custodied by the customer on whose behalf the ADRs were being obtained.  According to the SEC, Respondent failed to establish and implement effective policies
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SEC v. John Gregory Schmidt (S.D. Ohio Sept. 25, 2018, Contested)

Action against Defendant, a former registered representative, for allegedly operating a fraudulent scheme involving the misappropriation of client funds.  According to the SEC, Defendant transferred the proceeds from his sale of the securities of some customers to the accounts of other customers in order to disguise losses in their accounts.  The SEC alleges that Defendant did so without customer authorization and that he used falsified account statements and letters to authorize the transfers.

SEC Litigation
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In re Lichter, Yu and Associates, Inc., et al. (A.P. Sept. 25, 2018, Settled)

Action against Respondents, a PCAOB-registered accounting firm and its two co-owners, in connection with alleged misstatements made in Respondents’ audit of a corporation’s financial statements.  According to the SEC, after Respondent co-owners witnessed numerous red flags during the audit, Respondent firm’s audit report included misappropriated cash in its calculation of the corporation’s assets.  Respondent firm has agreed to pay disgorgement of $39,900, prejudgment interest of $3,788.49, and a civil penalty of $25,000.  Each Respondent co-owner
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In re TD Ameritrade, Inc. (A.P. Sept. 24, 2018, Settled)

Action against Respondent broker-dealer for alleged failure to file Suspicious Activity Reports (SARs) in connection with transactions executed by independent investment advisers.  The SEC alleges that Defendant terminated its relationship with numerous advisers after determining that the advisers’ activities posted a risk to Respondent and clients.  The SEC further alleges, however, that Defendant failed to file SARs with respect to the suspicious transactions of these advisers and failed to refer the advisers and the transactions
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SEC v. Adam Rentzer (D.N.J. Sept. 24, 2018, Contested)

Action against Defendant stock trader for alleged payment of undisclosed kickbacks to a broker in order to receive greater shares of IPOs marketed by two brokerage firms.  According to the SEC, Defendant shared the profits with his broker after selling the stock.  The SEC alleges that this conduct was in contravention of the policies and procedures of both firms.  Defendant has pled guilty to parallel criminal charges.

SEC Litigation Release
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In re Ophrys, LLC (A.P. Sept. 21, 2018, Settled)

Action against Respondent, an investment adviser, for alleged violation of the Advisers Act in connection with conflicts of interest.  According to the SEC, Respondent was compensated on top of its advisory fee for participating in agency transactions but failed to disclose the conflict or seek consent from its private fund clients.  Respondent has agreed to pay a civil penalty of $500,000.

SEC Order
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In re CMB Export, LLC, et al. (A.P. Sept. 21, 2018, Settled)

Action against Respondents, a federally designated regional center, the CEO, and 37 affiliated limited partnerships for alleged violation of registration requirements related to EB-5 immigrant investment securities in the form of limited partnership interests.  According to the SEC, Respondent regional center and Respondent CEO compensated unregistered broker-dealers for soliciting foreign investors and Respondent limited partnerships offered unregistered EB-5 securities.  Respondent regional center has agreed to pay a civil penalty of $5,150,000.  Respondent CEO has agreed
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In re Mizuho Bank, Ltd. (A.P. Sept. 21, 2018, Settled)

Action against Respondent, a Japanese corporation that engages in proprietary futures trading in the United States, for alleged spoofing.  The CFTC alleges that one of Respondent’s employees placed orders in Treasury and Eurodollar futures contracts intending to cancel them before execution.  Respondent has agreed to pay a civil penalty of $250,000 and post-judgment interest.

CFTC Press Release 

CFTC Order
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SEC v. World Tree Financial, LLC, et al. (W.D. La. Sept. 20, 2018, Contested)

Action against Defendants, an investment adviser and its owners, in connection with an alleged cherry picking scheme.  According to the SEC, one Defendant co-founder allocated profitable trades to certain accounts, including his own, and unprofitable trades to two accounts controlled by a third party after observing performance of the trades over the course of a day.  The SEC alleges that Defendants falsely represented to clients that trades would be allocated fairly, and the second Defendant
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