Kevin Richard Graetz, a former broker from New York, recently settled a FINRA complaint relating to his alleged failure to report $1 Million in tax liens over the course of seven years.
FINRA requires registered personnel to disclose tax liens and any other unsatisfied judgments in their Form U4.
As per FINRA’s settlement documents, in his Form U4 filings between February, 2013 and February, 2014, Graetz failed to mention the unsatisfied tax liens he was subject to.
Michael James Malone, a FINRA arbitrator in Detroit, recently denied an expungement request from broker Kathie Lee Foreman. Foreman was seeking expungement of a customer complaint in connection with “unsuitable” investments allegedly leading to the, also alleged, loss of $20,000.
Foreman, formerly of Sigma Financial Corp.; had also been accused by Troy William Johnson of failing to cash him out in spite of several requests to do so. According to the arbitrator, Foreman characterized Johnson as “an unsophisticated, nervous investor,” who had the bad fortune of investing during “the worst quarter since 2011.”
The case of Johnson v. Foreman was settled in December. Barely a day after Johnson withdrew his complaint (in exchange for an undisclosed sum) Foreman decided to file a request for expungement. Johnson did not oppose the request. At this time, neither the claimant nor the respondent opted for legal representation. They made the often ill-advised decision of “appearing pro se.”
Check cashing businesses are a major focus of anti-money laundering rules and regulations. Investors recently learned that federal and New York prosecutors are currently investigating Capital One Financial Corp.’s anti-money laundering program and “certain check casher clients” from the financial institution’s annual report – offering the perfect opportunity to review the regulatory expectations for check cashing businesses.
Capital One’s annual report released February 23 stated that the U.S. Department of Justice, U.S. Treasury Department’s Financial Crimes Enforcement Network and the Manhattan District Attorney’s office are currently investigating “certain check casher clients” from its commercial banking business and looking into the internal safeguards of its anti-money laundering (AML) program.
Last April, FINRA announced that it had revised the sanction guidelines that apply when there has been a violation of a FINRA rule. Professionals in the industry whose activities are regulated by FINRA need to be aware of the scope and impact of these changes.
The Sanction Guidelines do not directly prescribe specific penalties or punishments for each particular violation. In essence, their role is to assist FINRA adjudicators to impose sanctions in a fairer and more consistent manner.
They are meant to establish a range of potential sanctions for each type of violation, and they also introduce the concept of aggravating and mitigating factors, which FINRA’s hearing panels and the NAC are expected to consider throughout disciplinary proceedings.
The SEC is not used to losing a case in-house, but that is precisely what happened on April 18th, when Judge James Grimes dismissed the insider trading allegations against Charles L. Hill of Atlanta. Hill had made a sizable profit by buying shares of Radiant Systems Inc. right before an acquisition by NCR Corp, and selling them right after the deal was announced.
There has been much criticism of the SEC´s administrative proceedings. Critics believe they are not fair to defendants because there are no juries, the number of depositions is limited, and judges are, after all, on the SEC´s payroll. Considering how rare it is for defendants to win a case against the SEC in-house, Hill´s victory may also be seen as a victory for critics of this practice.
Hill had been litigating for over a year to avoid being pursued through an in-house administrative proceeding, but an Atlanta appeals court had allowed the SEC to move forward with its plan.
A unit of TD Bank, a US subsidiary of Canada’s Toronto-Dominion Bank, has agreed to pay a $125,000 fine to resolve allegations that it failed to record the required review of 3.1 million emails.
FINRA requires that all securities-related correspondence between registered representatives and the public receive supervisory review, pursuant to Rule 3010:
“Each member shall develop written procedures that are appropriate to its business, size, structure, and customers for the review of incoming and outgoing written (i.e., non-electronic) and electronic correspondence with the public relating to its investment banking or securities business, including procedures to review incoming, written correspondence directed to registered representatives and related to the member’s investment banking or securities business to properly identify and handle customer complaints and to ensure that customer funds and securities are handled in accordance with firm procedures.”
During the “SEC Speaks” Conference 2017, Acting U.S. Securities and Exchange Commission Chair Michael Piwowar amply discussed the plight of the “forgotten investor.” Citing the work of sociologist William Graham Sumner, who spoke of The Forgotten Man, “the victim of the reformer, social speculator, and philanthropist,” Piwowar questioned disclosure requirements, high corporate penalties and accreditation rules, which, he believes, have had a negative impact on lower-income investors.
“Imagine,” Piwowar said in his speech, “that we lived in a utopian world in which perfect disclosure of all material information about every company simply existed as a natural feature of the market landscape. Securities markets would be perfectly efficient… Investors would have just what they need… to make perfectly informed investment decisions.”
The Acting SEC Chair focused on the problems of disclosure, stating that the “forgotten investor” seldom has all the relevant information in hand in order to make those decisions. He compared lower-income investors to Graham Sumner’s “Forgotten Man,” who “works, he votes… he always pays… All the burdens fall on him, or on her.”
America’s population is rapidly aging. The number of US residents over the age of 65 is expected to double over the next 30 years. Today, seniors, specifically baby boomers, control 50% of all existing investable assets across the country.
This portion of the US population has a combined net worth of over $30 trillion. According to a 2016 survey by Public Policy, about one in five Americans over the age of 65 have “been taken advantage of financially in terms of an inappropriate investment, unreasonably high fees for financial services, or outright fraud.”
The U.S. Securities and Exchange Commission is considering whether it will bring enforcement actions against Atlanta’s $205 billion-asset SunTrust Banks. SunTrust Investment Services, the bank’s broker-dealer arm, allegedly purchased pricey mutual funds on behalf of customers when more affordable alternatives were readily available.
The SEC has made a “preliminary determination to recommend that the SEC bring an enforcement action against [SunTrust].” If these were to materialize, the financial institution could face hefty penalties and extensive losses in connection with its investment business.
Additionally, its fast-track privileges for the issuing of securities might be revoked for three years.
It may come as no surprise that doing business in China holds a high risk of Foreign Corrupt Practices Act (FCPA) violations. However, the record-setting numbers of FCPA enforcement actions seen in 2016 placed Mexico in a close second.
With increases in multi-jurisdictional anti-corruption enforcement, the FCPA Pilot Program and a number of new Mexican statutes signed into law, those doing business in Latin America may want to take note.
After six years of relatively consistent (and somewhat low) FCPA enforcement numbers, the Department of Justice (DOJ) and Securities Exchange Commission (SEC) have made 2016 a precedent setting year. A combined total of 53 actions – more than double those of the last four years – brought over $2 billion in U.S. corporate fines and billions more in fines by foreign regulators. While 22 of the of 53 FCPA enforcement actions prosecuted in 2016 involved FCPA violations in China, Mexico followed close behind with nearly 17% of the enforcement actions last year.
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