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SEC Requires Brokers to Act in Their Clients’ Best Interests

The new SEC rule that requires broker-dealers who make recommendations to their customers to act in their clients’ “best interest” takes effect on June 30, 2020.

By Scott L. Starr June 8, 2020 The new Securities and Exchange Commission (SEC) rule that requires broker-dealers who make recommendations to their customers to act in their clients’ “best interest” takes effect on June 30, 2020.  This is a significant change in the way stockbrokers have historically done their business. The old rule was that brokers need only make “suitable” recommendations to their clients.  Starting June 30, the brokers must at all times act in their clients’ best interests.  That new best interest rule will require the brokers to make complete disclosures about the investments they are recommending. For example, starting June...

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Indiana Secretary Of State Issues Advisory To Raise Awareness Of Private Offering Risks

Indiana Secretary Of State Issues Advisory To Raise Awareness Of Private Offering Risks

By WBIW.com The COVID-19 pandemic has caused significant disruption and anxiety to individuals and the financial markets. Because fraudsters often try to capitalize on current issues and problems to promote their scams, Indiana Secretary of State Connie Lawson today issued an investor advisory on exempt securities offerings, also known as “private placements,” in light of the coronavirus pandemic. A private placement is a securities offering that is not required by law to be registered with federal or state securities regulators. Private placements allow companies to sell stocks, bonds, or other securities to investors without completing the rigorous disclosures necessary in a registered...

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Indiana Secretary Of State Joins Task Force Cracking Down On COVID-19 Investment Scams

Indiana Secretary Of State Joins Task Force Cracking Down On COVID-19 Investment Scams

by: wbiw.com The Indiana Secretary of State’s Office announced that it has joined an international enforcement task force organized by the North American Securities Administrators Association (NASAA) to investigate fraudsters looking to capitalize during the novel coronavirus COVID-19 pandemic. “We are proud to join our colleagues in NASAA’s COVID-19 Enforcement Task Force,” said Secretary of State Connie Lawson. “Investment schemes related to COVID-19 are a significant threat to Hoosier investors, and fraudsters need to know that my office is dedicated to effectively protecting investors from COVID-19 investment fraud.” Through the Indiana Securities Division, the Secretary’s office is a member of NASAA, the membership organization...

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Banks and Brokerage firms can be liable for aiding and abetting ponzi schemes

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By Scott L. Starr Ponzi schemers rarely have the ability to carry out their nefarious conduct alone; instead, they need the assistance of brokers and banks to handle a variety of financial transactions.  Under some circumstances, these banks and brokerage firms may ultimately be found liable for aiding and abetting the Ponzi scheme. By way of example, Starr Austen & Miller a few years back represented a large group of Ohio investors who had invested in excess of $30 million with a local insurance salesman who was operating a Ponzi scheme. The Ponzi schemer ran all of the transactions through his brokerage...

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WARNING: CD and Promissory Note scams are rampant

WARNING: CD and Promissory Note scams are rampant

By: Scott L. Starr Yet another Certificate of Deposit (CD) scam has cropped up, this time in Florida, where Federal prosecutors have charged Dennis Sotnikov from Florida with a 30 million dollar scheme which caused investors to purchase fake CDs by the use of fake websites designed to look like legitimate banks. According to reports, about 70 investors were hoodwinked into putting approximately 30 million dollars into non-existent CDs with the promise of higher than market rate returns. Starr Austen & Miller has represented hundreds of defrauded investors in the past on schemes similar to this.  At present, Starr Austen & Miller...

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FINRA Sanctions Five Wall Street Firms $1.4 Million For Failure to Properly Monitor Minor Accounts

Five large brokerage firms have been fined $1.4 million by FINRA for failing to reasonably supervise custodial accounts.

Five large brokerage firms have been fined $1.4 million by FINRA for failing to reasonably supervise custodial accounts. The sanctioned firms were Citigroup Global Markets Inc.; J.P. Morgan Securities LLC; LPL Financial LLC; Morgan Stanley Smith Barney LLC; and, Merrill Lynch, Pierce, Fenner & Smith Incorporated. The companies paid a combined $1.4 million to settle the matter and agreed to review their policies, systems, and procedures to ensure their account supervision is in compliance with FINRA rules. The firms neither denied nor admitted to the charges. FINRA said it sanctioned the firms for failing to supervise Uniform Transfer to Minors Act (UTMA)...

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Lowell, Indiana man strikes plea deal in ponzi-like investment scheme, records show

A Lowell, Indiana, man accused of bilking more than 25 people out of millions in a crooked investment scheme has entered a guilty plea in U.S. District Court, to avoid taking the case to trial, records show.

By Lauren Cross of NWItimes.com A Lowell, Indiana, man accused of bilking more than 25 people out of millions in a crooked investment scheme has entered a guilty plea in U.S. District Court, to avoid taking the case to trial, records show. Richard E. Gearhart, 69, faces up to five years in prison, three years of supervised release and a $250,000 fine, records show. If the agreement is accepted by a judge, he will also be ordered to pay restitution to his victims, though the final amount has yet to be determined. Records do not indicate if his co-defendant, George R. McKown, 66, of...

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Private Placements 101

A private placement, also sometimes known as an unregistered offering, is a way for companies to raise money from investors without having to conduct a public offering. 

Sources: U.S. Securities and Exchange Commission, Indiana Secretary of State What is a private placement? A private placement, also sometimes known as an unregistered offering, is a way for companies to raise money from investors without having to conduct a public offering.  Many of the companies that raise money this way are privately held startups.  Private placements are not subject to some of the disclosure requirements and other regulations that public offering are. Who can invest? Generally, private placements are restricted to accredited investors.  Accredited investors are individuals who meet one of two criteria:  they earned more than $200,000 (or $300,00 together with a...

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Former Indianapolis payroll exec pleads guilty in $9.4M fraud scheme

An Indianapolis man who operated a downtown payroll services business pleaded guilty to federal charges Friday after admitting to conducting a fraud scheme that cost his clients and Internal Revenue Service more than $9.4 million, the U.S. Attorney’s Office announced.

By Indianapolis Business Journal Staff An Indianapolis man who operated a downtown payroll services business pleaded guilty to federal charges Friday after admitting to conducting a fraud scheme that cost his clients and Internal Revenue Service more than $9.4 million, the U.S. Attorney’s Office announced. David Downey, 50, who ran Time Payroll from 2009 to 2017, faces a possible prison sentence of six years, plus fines of up to $750,000. He also could be ordered to pay restitution to his clients and the IRS. U.S. District Judge Catherine Perry scheduled sentencing for Dec. 13. Downey, who had clients in Indiana, Illinois, Kentucky and...

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Amish businessman ordered to pay $5.2M in scam targeting his own community

Amish businessman ordered to pay $5.2M in scam targeting his own community

By James Leggate of FOXBusiness.com A man who authorities said took advantage of his Amish heritage to recruit novice investors into a fraudulent scheme has been ordered to pay $5.2 million, most of it to his clients. Indiana resident Earl Miller’s 72 investors lost more than $4.1 million when his investments failed, according to a complaint from the Securities and Exchange Commission in 2015. He had encouraged people to put their retirement savings into his fund, which he had no experience in managing, by advertising “double digit annual returns” and promising a fixed-rate return of 8 percent to 12 percent per year,...

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