Blog Posts Tagged With Financial Institutions and Regulated Entities

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In re Fifth Street Management, LLC (A.P. Dec. 3, 2018, Settled)

Action against Respondent, a former investment adviser, for alleged misallocation of expenses and failure to review client valuation models.  According to the SEC, Respondent improperly allocated rent and other overhead expenses to clients.  The SEC also alleges that Respondent failed to reasonably review its clients’ quarterly valuation models, which caused the clients to file financial statements that contained material misstatements.  Respondent has agreed to pay disgorgement of $1,999,115.86, prejudgment interest of $334,545.65, and a civil
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In re Retirement Capital Strategies, Inc. (A.P. Nov. 19, 2018, Settled)

Action against Respondent, a registered investment adviser, for alleged failure to apply advisory fee discounts to certain client accounts contrary to Respondent’s disclosures, representations, and advisory agreements.  According to the SEC, the improperly calculated advisory fees resulted in overcharges to certain clients. Defendant has agreed to pay a civil penalty of $50,000.

SEC Order

SEC Administrative Summary
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In re Zachary Coburn (A.P. Nov. 8, 2018, Settled)

Action against Respondent, an entrepreneur and former registered representative, for alleged operation of an unregistered online cryptocurrency exchange.  According to the SEC, Respondent founded and later sold an exchange that allowed the purchase and sale of digital assets known as Ether and ERC20 tokens without registering the exchange or qualifying for an exemption from registration.  Respondent has agreed to pay disgorgement of $300,000, prejudgment interest of $13,000, and a civil penalty of $75,000.

SEC Order
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In re Citibank, N.A. (A.P. Nov. 7, 2018, Settled)

Action against Respondent, a financial services firm, in connection with an industry-wide sweep into practices related to the pre-release of American Depository Receipts (ADRs).  In connection with the settlement, Citibank neither admitted nor denied the SEC’s findings.  According to the SEC, Citibank  pre-released ADRs to pre-release brokers pursuant to an agreement which required the broker receiving the pre-released ADRs to represent, among other things, that it beneficially owned the ordinary shares (or an equivalent security)
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In re ITG Inc. and Alternet Securities, Inc. (A.P. Nov. 7, 2018, Settled)

Action against Respondents, a registered broker-dealer and its affiliate, for alleged misrepresentations and failure to protect customers’ confidential trading information.  According to the SEC, Respondents misrepresented or failed to disclose features of a dark pool that Respondents operated, including the existence of two separate liquidity pools within the alternative trading system. The SEC further alleges that Respondents improperly disclosed information about customers’ trades, such as order size.  Respondents have agreed to pay a civil penalty
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In re Pennant Management, Inc. (A.P. Nov. 6, 2018, Settled)

Action against Respondent, a formerly registered investment adviser, for alleged misrepresentations to investors. According to the SEC, Respondent overstated its due diligence program with respect to certain investments and failed to disclose that it was investigating an alleged fraud connected with one of these investments.  The SEC further alleges that Respondent underfunded its compliance program and failed to implement certain due diligence and monitoring policies and procedures, which resulted in compliance failures.  Respondent has agreed
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In re Mark A. Elste (A.P. Nov. 6, 2018, Settled)

Action against Respondent, the founder, CEO, and CIO of an investment advisory company, for alleged failure to maintain adequate controls.  According to the SEC, Respondent knew that his company’s compliance program was underfunded but failed to address the deficiency, which resulted in compliance failures.  The SEC further alleges that Respondent failed to put in place adequate due diligence and monitoring policies. Respondent has agreed to pay a civil penalty of $45,000.  In a related proceeding
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SEC v. Roger Knox, et al. (D. Mass. Oct. 2, 2018, Contested)

Action against Defendants, an asset management firm, fintech company, and their two founders and CEOs, for alleged illegal sales of microcap stock and for aiding large shareholders in over 50 public companies to evade sales restrictions.  The SEC has additionally named two family members and an entity controlled by one Defendant CEO as relief defendants.  According to the SEC, Defendants helped large shareholders to conceal their identities and stock ownership, gain anonymous access to brokerage
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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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