Articles Posted in Securities and Exchange Commission

Michael Siva, a former Morgan Stanley broker (MS), has pleaded not guilty to criminal charges accusing him of insider trading. Siva is one of several people charged over their alleged participation in a group of “tipping chains” and trading on tips about upcoming acquisitions and mergers. The information were provided by Bank of America (BAC) consultant Daniel Rivas. Siva is said to have gotten the tips from the James Moodhe, who is the father of Rivas’ girlfriend.

Rivas and Moodhe have both pleaded guilty to the criminal charges accusing them of insider trading. They are cooperating with the government’s probe.

Moodhe is said to have shared Rivas’s tips with Siva from at least 2015 up through earlier this year. Siva allegedly used the information so he could make successful trades for clients as well as for himself. Moodhe and Siva allegedly met at eating places outside NYC during which time the former would read details about upcoming deals to Siva, including the value of the deals and when news about them was expected to go public. The two men allegedly made over $3M trading prior to and after the announcement of the deals.
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FINRA Fines Ex-Morgan Stanley Broker, Issues 15-Day Suspension

The Financial Industry Regulatory Authority has fined an ex-Morgan Stanley (MS) broker $10K and ordered him to serve a 15-day suspension after he allegedly tried to resolve a client’s complaint without the firm’s consent. The regulator is charging Lewis H. Robinson, who now works with BB & T Securities in Florida, with violating Rule 2010. The rule mandates that brokers satisfy “high standards” as they pertain to commercial honor and principles of trade.

According to FINRA, Robinson wrote $12,203 in checks to resolve three complaints made by the client. Advisor Hub reports that Robinson said that he notified Morgan Stanley as soon as the client noticed that the account was overcharged a higher commission rate than what had been agreed upon but that the firm refused to give a refund because the allegedly mistaken excess fee was charged too long ago.

Four Firms Are Ordered to Pay $4.75M for Market Access Rule Violations

The Financial Industry Regulatory Authority, CBOE Holdings company Bats, the New York Stock Exchange, NASDAQ, and their affiliated Exchanges have fined four financial firms $4.75M collectively for violating the Securities Exchange Act of 1934’s Rule 15c3-5, which is also known as the Market Access Rule. The fines are: $2.5M for Deutsche Bank (DB), $800K for J.P. Morgan (JPM), $1M for Citigroup (C), and $450K for Interactive Brokers (IBKR).

The firms have given market access to quite a number clients that engage in millions of trades daily. However, according to FINRA, Bats, NASDAQ, and NYSE, when doing so, they purportedly did not comply with at least one of the Market Access Rule’s provisions when they did not put in place certain risk management controls and procedures so that orders that were “erroneous or duplicative,” or went beyond certain kinds of thresholds, could be detected or prevented. The firms are also accused of not having systems in place for properly supervising customer trading so that “potentially volatile and manipulative activity” could be avoided.

The US Securities and Exchange Commission has brought fraud charges against two men and their company, United Business Alliance, LLC, for allegedly running a prime bank investment scam. The regulator is seeking permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

According to the regulator’s complaint, between 10/2013 and 7/2015, George Frank Polera and Anthony Joseph Marino, through United Business Alliance, took part in a fraudulent prime bank scam, raising over $615k from 10 investors. The two men lacked the registration required to sell investments.

The two men, who are based in Las Vegas, and their company allegedly promised investors huge return rates, including 90% every two weeks for 40 weeks on one investment and 84% per year on one note. Investors were sold securities that were either promissory notes or investment contracts.

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Lawyer Barred Over Fraud Allegations
The US Securities and Exchange Commission has barred David Lubin, a New York-based lawyer, from practicing or appearing before the regulator and acting as any company’s director or officer. The regulator is accusing him of making misleading and false statements in corporate filings and committing fraud while he was the attorney and director of Entertainment Art. He was also the public company’s biggest shareholder.

According to the SEC’s securities order, not only did Lubin draft and sign misleading public filings, but also, he concealed their “true ownership” as well as that the fact that a significant chunk of the shares were of a “restricted nature.”

As a result, after Entertainment Art’s name was changed to Biozoom, over 14 million shares were resold illegally in an unregistered distribution, rendering $34M of illicit profits. At the time, the shares had belonged to a shell investor.

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Ex-Adviser of Retired NBA Player Tim Duncan is Barred from the Industry

The US Securities and Exchange Commission has gotten a judgment barring former financial adviser Charles A. Banks IV from the securities industry. Banks, who pleaded guilty to wire fraud that involved bilking ex-NBA player Tim Duncan, was sentenced to 48 months in prison in criminal court and ordered to pay $7.5M in restitution.

Now, because he committed investment fraud, Banks is also banned from the industry, as well as prohibited from serving as a director or an officer of any public company. Banks also must pay a penalty, disgorgement, and pre-judgment interest.

Penn West Petroleum is Accused of Accounting Fraud

The US Securities and Exchange Commission has charged Penn West Petroleum Ltd., now called Obsidian Energy Ltd., and three of its ex-finance executives with involvement in an alleged accounting fraud. According to the regulator, the Canadian-based oil and gas company fraudulently transferred hundreds of millions of dollars in expenses to capital expenditure accounts from its operating expense accounts. As a result, Penn West was able to artificially lower operating expenses by up to 20% during some periods, as well as falsely enhance the metrics having to do with profitability and oil extraction efficiency. These metrics are important for selling barrels of oil.

The SEC is accusing ex-Penn West CFO Todd Takeyasu, ex-VP of Accounting and Reporting Jeffery Curan, and ex-Operations Controller Waldermar Grab of running the accounting fraud. The regulator claims that the three men violated federal securities laws related to antifraud, books and records, reporting, and internal controls provisions.

The US Securities and Exchange Commission is charging two-ex Nomura (NMR) head traders with fraud. Kee Chan and James Im ran Nomura Securities International Inc.’s commercial mortgage-backed securities desk. The regulator claims that they purposely lied to customers to inflate profits for themselves and the firm. As a result, said the SEC, the two of them made an additional over $750K in trading profits for the desk. They received healthy bonuses as a result.

Commercial Mortgage-Backed Securities
CMBSs are asset-backed securities that have commercial real estate loans as their underlying assets. These debt obligations are often called bonds. CMBSs are illiquid securities.

According to the Commission, while serving as trade intermediaries with customers seeking to sell and buy CMBSs on the secondary market, Im and Chan made it seem as if they were working out bond purchases with a third-party seller at more than what Nomura paid to obtain the bonds. Im even allegedly told a customer that he had sought to deceive on purpose. Meantime, Chan is accused of modifying a customer email to protect his lie regarding a bond’s bid price.

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Barclays Must Pay Back Sales Charges, Advisory Fees
The US Securities and Exchange Commission announced that Barclays Capital (BARC) has settled securities charges accusing the firm of overbilling clients. As part of the resolution, which includes paying over $97M, Barclays must pay back advisory fees and mutual fund sales charges to clients that were affected. The firm is settling without denying or admitting to the SEC’s findings.

The SEC’s case involved three sets of violations resulting in almost $50M in client overcharges. According to the Commission, two of Barclays advisory programs charged over 2,000 clients for services that were not conducted as presented. Meantime, 63 broker-dealer clients paid too much in mutual fund sales charges or fees because Barclays recommended that they purchase more costly share classes even though there were less expensive ones available. Also, over 22K accounts paid Barclays excess fees because the firm made billing mistakes and miscalculations.

Ex-SEC Staffer Accused of Securities Fraud
The SEC has filed charges against David R. Humphrey, one of its ex-employees, for securities fraud related to trades that he made. Humphrey worked with the regulator from 1998 to 2014.

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The US Securities and Exchange Commission said that Barclays Capital (BARC) has agreed to pay over $16.5M as part of a settlement resolving allegations accusing the company of failing to properly supervise two of its ex-mortgage bond traders. The men are accused of lying to clients, as well as overcharging some of them. According to the regulator, Barclays did not put into place or execute the proper supervisory procedures that could have stopped or detected the alleged residential mortgage-backed securities fraud.

The two traders, David Wong and Yoon Seok Lee, are accused of making misleading or false statements to the firm’s customers about RMBS securities, how much Barclays makes for facilitating the trades, and other pertinent information. Lee and Wong also are accused of making excessive mark-ups on certain transactions without telling customers.

The SEC said that the ex-Barclays traders’ actions, which would have occurred between 6/2009 and 12/2012, caused Barclays to earn $15.5M in profits.

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