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SEC’s Self-Report Project Nabs $125M In Deals With 79 Firms

SEC's Self-Report Project Nabs $125M In Deals With 79 Firms

By Rachel Graf of Law360.com Seventy-nine investment advisers that self-reported steering clients to funds with relatively high fees have agreed to repay investors about $125 million, but will avoid additional fines under a U.S. Securities and Exchange Commission initiative announced last year. Investment advisers including Deutsche Bank Securities Inc., Wells Fargo Clearing Services LLC and RBC Capital Markets LLC settled the SEC’s claims that they recommended mutual fund share classes with recurring fees over lower-cost options, the agency announced Monday. The SEC said these recommendations created a conflict of interest since the investment advisers benefited from the fees. The advisers didn’t disclose these...

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FINRA’s Recent Enforcement Actions Pack A Hard Punch

Based on an analysis of FINRA’s monthly disciplinary reports, press releases and online database, the fines reported by FINRA in 2018 increased slightly to $68 million from $65 million in 2017, a 5 percent jump, yet were down significantly (61 percent) from the record-setting fines of $176 million in 2016.

By Brian Rubin, Adam Pollet, Rebekah Runyon and Gregory Amoroso for Law360.com A review of the disciplinary actions brought by the Financial Industry Regulatory Authority in 2018 shows that the amount of fines ordered by FINRA increased compared with 2017. However, FINRA also brought fewer actions and ordered decreased restitution. Fines, Restitution and Disciplinary Actions Based on an analysis of FINRA’s monthly disciplinary reports, press releases and online database, the fines reported by FINRA in 2018 increased slightly to $68 million from $65 million in 2017, a 5 percent jump, yet were down significantly (61 percent) from the record-setting fines of $176 million in 2016. Additionally, the fines...

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Fiduciary Duty Rule by Scott L. Starr, Partner

Fiduciary Duty Rule by Scott L. Starr, Partner

Law 360’s Allison Noon recently published an article entitled “Facing Fiduciary Duty, Brokers Threaten to Exit Nevada” (included below).  According to Ms. Noon: “Top stock brokerages are accusing Nevada regulators of playing a dangerous game with fiduciary rules and are threatening to leave the Silver State if officials don’t back off.” Ms. Noon goes on to report that various Wall Street trade associations and brokers Morgan Stanley, Charles Schwab, Edward Jones, TDAmeritrade, and Wells Fargo “offered ominous promises that investment options would disappear in Nevada if Nevada’s security regulators adopted the fiduciary standard.” This just goes to show how Wall Street does not really care...

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Former powerhouse investment broker Buck sentenced to more than 3 years in prison

By Susan Orr of the Indianapolis Business Journal A federal judge on Wednesday sentenced former powerhouse Merrill Lynch broker Thomas Buck to three years and four months in prison. Buck, who pleaded guilty to one count of securities fraud in October 2017, also agreed at that time to pay a $5 million civil penalty after prosecutors alleged he charged clients $2 million in excessive commissions and failed to recommend fee-based accounts. The 40-month sentence imposed by Judge James Sweeney fell short of the 78-month sentence prosecutors had sought. Sweeney also imposed two years of supervised release on Buck, 65, and ordered him to complete...

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More Seniors Victimized by Financial Scams

More Seniors Victimized by Financial Scams

By Yuka Hayashi of The Wall Street Journal The number of suspected cases of elder financial abuse reached a record last year, an increase that comes as new federal and state laws prompt banks to take a more active role in curbing frauds and scams that target older customers. Banks for their part have been beefing up training programs for employees on how to detect, stop and report issues without violating a customer’s privacy.  Employees are even learning to recognize early signs of cognitive decline. Last year, banks reported 24,454 suspected cases of elder financial abuse to the Treasury Department, more than double...

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FINRA Awards $4.2M For Morgan Stanley’s Lack Of Oversight

FINRA Awards $4.2M For Morgan Stanley's Lack Of Oversight

By Darcy Reddan of Law360.com A Financial Industry Regulatory Authority arbitration panel has ordered Morgan Stanley Smith Barney LLC to pay a former NFL player and a Mega Millions lottery winner a combined $4.2 million, ruling the wealth manager failed to adequately supervise the adviser who squandered the funds. The panel awarded $3.3 million to James Groves, a Mega Millions lottery winner, and $879,000 to retired NFL player Asante Samuel. The ruling relates to the conduct of Aaron R. Parthemer, a former adviser at Morgan Stanley Smith Barney and a Miami Beach nightclub owner, who steered Samuel and Groves to invest in...

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Indiana Secretary of State Fines LPL Financial (Linsco Private Ledger) $450,000 for Failing to Supervise Its Indiana Brokers

Indiana Secretary of State Fines LPL Financial (Linsco Private Ledger) $450,000 for Failing to Supervise Its Indiana Brokers

Written by Scott L. Starr December 3, 2018 The securities industry is designed so that the first line of defense against fraud is the requirement that a brokerage firm must police its own brokers. A principal rule in the securities industry is that brokerage firms are required to supervise each of its broker’s offices. LPL Financial has recently agreed to pay a civil penalty of $450,000 for “various deficiencies” related to the supervision of its Indiana brokers, the Indiana Secretary of State’s Office recently reported.  In addition to the payment of this civil penalty, Linsco Private Ledger agreed to conduct a third party...

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Recent Lawsuit Claims Chicago Cleric Steered $35 Million into his Ponzi Scheme

Recent Lawsuit Claims Chicago Cleric Steered $35 Million into his Ponzi Scheme

The following is an article authored by Law360’s David Matthews describing how a Chicago rabbi allegedly abused his trust with the Chicago Jewish community by convincing his followers to invest over $35 million into a Ponzi scheme. The facts as described by the following article contain the hallmarks of a typical Ponzi scheme.  These are: A person in a position of trust, such an accountant, cleric, preacher, insurance salesman, or an investment advisor; Abusing his trust by convincing his followers to invest their hard earned retirement savings; By promising big returns with little or no risk; The Ponzi schemer steals...

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Investment Adviser Gets 6.5 Years For $1.6M Ponzi Scheme

By John Petrick of Law360.com A federal judge on Monday sentenced a New Jersey man who pled guilty to running a Ponzi scheme that bilked $1.6 million from his clients to support his luxury lifestyle to six and a half years in prison. In addition to the prison time, U.S. District Court Judge Gerald J. Pappert in Pennsylvania also ordered defendant Carl Frederic Sealey to pay more than $1.5 million in restitution to the victims of his scheme, federal officials said. About 21 people invested more than $1.6 million with Sealey's investment firms Global Standard Industries and SEK Industries and lost $1.5...

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Asset Management Firm CEO Charged With $16M Fraud

Attached below is a copy of an article recently reported by Rachel Graf and Law360 entitled “Asset Management Firm CEO Charged With $16M Fraud”. This article defines a pattern of conduct that is occurring everywhere. Scott Starr of Starr Austen & Miller within the last five years has represented over 100 victims of similar schemes, wherein a life insurance salesman, a stockbroker, or an investment advisor convinces his clients to purchase promissory notes, LLC membership interests, stocks, or such similar investments for the purported purpose of “investing in real estate” promising high returns, typically in the 10% range. In reality,...

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