SEC Category Archives — Investor Lawyers Blog Published By Investment Fraud Attorneys

SEC Fines Aegis Capital $2.3M Over Allegedly Unsuitable Variable Interest Rate Structured Product Sales

Published on: August 19, 2022 | by Shepherd Smith Edwards & Kantas, LLP

Aegis Brokers in Melville, NY and Boca Raton, FL Allegedly Unsuitably Recommended VRSPs to 48 Customers, Including Elderly Investors

In July 2022, the US Securities and Exchange Commission (SEC) filed civil charges against Aegis Capital Corp., former Managing Director Alan Zelig Appelbaum, and ex-broker Paul Francis Gallivan. They are charged for allegedly unsuitably recommending variable interest rate structured products (VRSPs) to retail customers. These complex, structured products are usually issued only by well-known financial institutions.

According to the Commission’s settled administrative proceeding against Aegis, fourteen of its brokers from its Melville, New York and Boca Raton, Florida branches recommended VRSPs to four dozen customers for whom this type of investment was unsuitable. Without denying or admitting to the regulator’s findings, Aegis will pay a $2.3M penalty and $220K disgorgement plus prejudgment interest.

J.P. Morgan Fined $200M by SEC & CFTC Over Messaging and Communications Violations

Published on: December 22, 2021 | by Shepherd Smith Edwards & Kantas, LLP

J.P. Morgan Securities Will Pay $125M to the Commission

J.P. Morgan has arrived at two settlements over recordkeeping and communication violations. These violations included using unapproved channels, such as WhatsApp and personal texts messages. One settlement is with the US Securities and Exchange Commission (SEC) and the other with the Commodity Futures Trading Commission (CFTC). The firm has admitted to the violations.

The settlement with the SEC is with J.P. Morgan brokerage firm subsidiary, J.P. Morgan Securities, LLC for failures by the company and its employees to maintain and preserve written communications. In addition, the broker-dealer will pay a $125M penalty and enhance its compliance policies and procedures to resolve the issue.

SEC Files Fraud Charges Against Barred Broker Michael Shillin Who Is Named In 37 Disputes

Published on: October 11, 2021 | by Shepherd Smith Edwards & Kantas, LLP

Former Wisconsin Financial Advisor is Accused of Defrauding at Least 100 Advisory Clients

Michael Francis Shillin, who was barred by the Financial Industry Regulatory Authority (FINRA) and Wisconsin’s Officer of the Commissioner of Insurance (OCI) in January 2021, is now facing Securities and Exchange Commission (SEC) charges.

The regulator is accusing the previously registered broker and investment advisor of defrauding at least 100 investment advisory clients, including many elderly investors. The SEC brought its case in September 2021.

Investment Recommendations Don’t Always Equate To a Customer’s Best Interests

Published on: February 1, 2021 | by Shepherd Smith Edwards & Kantas, LLP

SEC’s Regulation BI May Not Be Protecting Investors The Way They Think

It has been nearly seven months since the SEC’s Regulation Best Interest (BI), a rule mandating that brokers NOT market themselves as financial advisors unless they actually are dually registered to be one, went into effect. The aim of this distinction is to let investors know whether they are working with someone who is bound to act in their best interests or not.

While brokers are supposed only to recommend financial products to customers that are suitable for them, this recommendation can also be based on what product will earn them the highest commission. This potential conflict of interest can be financially disadvantageous to an investor.

SEC Accuses Financial Advisor And Strategic Wealth Advisor Group of Stealing $2.2M From Senior Investors

Published on: September 4, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Investment Advisor Allegedly Defrauded Senior Investors to Fund Lavish Lifestyle

The US Securities and Exchange Commission (SEC) has filed charges against Mark Joseph Boucher, a California-based investment adviser, and his firm, Strategic Wealth Advisor Group Services.

Boucher and Strategic Wealth Advisor Group are accused of stealing $2.2M from older customers, including one who had died. Now, the regulator wants permanent injunctions, civil penalties, and disgorgement with prejudgment interest.

SEC Announces $4.5M Whistleblower Award

Published on: May 29, 2019 | by Shepherd Smith Edwards & Kantas, LLP

In a Securities and Exchange Commission (SEC) whistleblower case that resulted in a company probe and two successful enforcement actions, the regulator has awarded $4.5M to the individual who stepped forward to provide the key information. This person is the 62nd one to receive an SEC whistleblower award since the Commission began granting them in 2012.

According to the regulator, the whistleblower provided an anonymous tip internally to the company about the alleged wrongdoing, as well as a similar tip to the SEC within 120 days. The information compelled the company to conduct its probe into the misconduct allegations and then report them to the Commission and to a second agency. After the company concluded its investigation, it notified both agencies of the outcome.

While the SEC didn’t provide specifics about the whistleblower case—it refrains from doing so in order to protect the confidentiality of any informants/claimants—The Wall Street Journal identified the claimant as an ex-Brazilian orthopedic surgeon who brought up concerns about an alleged kickback scam run by a subsidiary of Zimmer Biomet Holdings.

Unregistered Investment Adviser Accused in $29M Ponzi Scam

Published on: April 3, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Carol Ann Pederson, an unregistered investment advisor and an ex-CPA, is facing charges accusing her of defrauding more than two dozen investors. The US Securities and Exchange Commission claims that Pederson:

Raised at least $29M from investors.
Made false promises that their money would go into “federally guaranteed securities.”

$22M HEDGE FUND FRAUD LEADS TO SEC BAN FOR MONEY MANAGER

Published on: April 25, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Michael Scronic Pleads Guilty in Ponzi Scheme

Michael Scronic, who touted himself as the hedge fund manager of the unregistered Scronic Macro Fund, has agreed to a US Securities and Exchange Commission ban permanently blocking him from buying or selling securities. In a parallel criminal case, Scronic pleaded guilty to securities fraud that involved 45 victims in his over $22M hedge fund fraud. His victims who suffered significant investment fraud losses included acquaintances, relatives, and friends. According to Bloomberg, investors gave him amounts ranging from $23K to $2.4M to invest.

Prosecutors contend that Scronic lied about his investment fund’s performance, touting returns of up to 13% when, in reality, the fund suffered millions of dollars in losses. About $500K, also from investors, was used to fund his own expenses, including a $12K/month New York rental, mortgage payments on a Vermont vacation home, country club and beach club membership fees, and about $15K/month in credit card expenses. The investment scam went on from 2012 through June 2017.

Sanctions Against Wedbush Securities in SEC and FINRA Rulings Are Upheld by the 9th Circuit

Published on: April 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The United States Court of Appeals for the 9th Circuit has refused to overturn the US Securities and Exchange Commission ruling that Wedbush Securities Inc. engaged in inadequate supervision of its own regulatory compliance. The appeals court also affirmed the suspension of the brokerage firm’s president and principal Edward W. Wedbush.

The SEC’s 2016 finding had sustained a 2014 ruling by the Financial Industry Regulatory Authority’s National Adjudicatory Council, which ordered Wedbush to pay a $350K fine for either not filing, or filing late, dozens of documents regarding complaints and judgments that had been brought against the investment firm and its financial representatives. Finra found that Wedbush Securities violated the bylaws and rules of the NASD, the NYSE, and the self-regulatory organization itself 158 times and was delinquent in submitting the documents at issue over a five-year period, from 1/2005 to 7/2010.

Wedbush and its president had tried to argue before the SEC that FINRA was wrong in finding that the broker-dealer failed to supervise reporting requirements. The brokerage firm also questioned whether the hearing it received before the SRO was a fair one since a FINRA rule did not specifically note suspension as a sanction.

SEC Proposes “Regulation Best Interests” that Would Prevent Brokers from Merely Calling Themselves Investment Adviser

Published on: April 20, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is proposing a rule that would keep registered representatives and brokers from also referring to themselves as investment advisors. In almost 1,000 pages of new proposals, the regulator articulated that it wants brokerage firms to make sure that the investing public knows that while brokers can sell investment products they are not trusted fiduciary advisors—nor is it their role to continue to offer advice after a sale has been made. Under the proposed rule, brokers would no longer be allowed to call themselves a trusted “advisor” or “adviser.” They can, however, take steps to become a registered investment adviser.

Addressing the proposed package, SEC Chairman Jay Clayton said that “investor confusion” about what differentiates broker-dealers from investment advisers is what prompted these latest initiatives. While both can give retail investors advice regarding possible investments, the two have different kinds of relationships with them. Clayton also noted that retail investors can suffer harm if they don’t know that certain conflicts of interest may be involved when working with either broker-dealers or investment advisers. Investors also may be giving more authority over their finances to a broker or investment adviser than they should.

In a 4-1 vote this week, the SEC’s ”Regulation Best Interests” measures for brokers was moved forward. Under the new measures, brokers would be obligated to place clients’ best interests before their own when it comes to recommending investment strategies or products. Brokers would have to set up and enforce written procedures and polices that would identify, expose, get rid of, or avoid conflicts of interest that might involve a financial incentive. While the existing broker standard requires that they recommend investment products that are suitable to each client, brokers are still allowed to endorse the products that gives them the greater financial payday.