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FINRA Levies $1 Million Fine Against Fidelity for Fraud

Fidelity Investments accrued $1 million in penalties from FINRA, due to failing to protect clients from a woman posing as a Fidelity broker. Lisa A. Lewis, who identified herself as a Fidelity broker, focused primarily on taking advantage of senior citizens. She garnered personal information from at least nine individuals and proceeded to create accounts in their names, while having all communications about them forwarded to herself. From 2006 to 2013, Lewis stole more than $1 million from her clients, according to FINRA. She pleaded guilty to wire fraud and is currently serving a jail sentence. Lax Supervision by Fidelity Allows...

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$800,000 Stolen in Elaborate Fraud Scheme

Stealing over $800,000 in the process, New York City man Moazzam Ifzal Malik, was ousted as a con man. He claimed to be an uber experienced hedge fund manager while embezzling the funds of up to 17 investors, according to a statement from New York Attorney General Eric Schneiderman. Malik, 33, created several fake hedge funds that he used to filter money from investors for personal use. He has been convicted of 28 criminal charges, with a large amount related to his fictitious hedge funds. How Malik’s Fraud Scheme Worked Malik bragged to potential investors that he possessed over a decade of...

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Indy Lawyer Suspended For $19M Ponzi Scheme

Indianapolis lawyer, Charles B. Blackwelder, has been suspended from the practice of law following a guilty plea to four Class B felony counts of securities fraud. He and his daughter, Cara Grumme, were accused of scamming more than 300 elderly Indiana residents of more than $19 million. The securities involved 35 residential properties located in Carmel, Fishers and elsewhere in Hamilton County, as well as some commercial property in Hamilton, Hancock and Marion counties. According to the Indiana Secretary of State’s Office, CFS, LLC – Blackwelder’s company – sold securities, marketing investments in rental properties to seniors as a means to...

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Innaccurate Data Costs Virtus $16.5 Million

The Securities and Exchange Commission (SEC) settled with Virtus Investment Advisers for $16.5 million, from charges stemming from publicized false performance data. the report was generated by subadviser F-­Squared, which was ultimately found to be significantly fabricated, according to a SEC statement. F-­Squared was already facing its own battles, which include filing for bankruptcy in July and paying a $35 million settlement, due to defrauding investors through falsified performance advertising. Andrew J. Ceresney, director of the SEC Enforcement Division, stated “Virtus accepted F-­Squared's historical performance misrepresentations at face value and ignored red flags that called these statements into question, and if an investment adviser chooses to advertise, it is responsible...

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Trading Fraud Scheme Ends in Guilty Verdict as One Perpetrator Eats Evidence

Steven Metro, a former managing clerk at the prestigious New York law firm Simpson Thacher & Bartlett, was the third individual to plead guilty for conducting an insider trading scheme in which evidence written on a napkin was consumed to conceal the impropriety. Metro pleaded guilty to one count of securities fraud, as well as one count to commit securities fraud and tender offer fraud. A third count was dismissed before U.S. District Judge Michael Shipp in Trenton, New Jersey. Attempts to reach Metro’s lawyer, James Froccaro, have not been responded to. Edible Fraud Scheme? Metro, 41, of Katonah, New York, was accused of passing tips about mergers and...

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SEC Fines Accountants Over Missed Red Flags In Securities Fraud Case

CPA Firm Grant Thornton, LLP and two of its partners were recently sanctioned by the U.S. Securities and Exchange Commission over claims that they missed red flags when inspecting two publicly traded companies that were the focus of SEC enforcement actions due to accounting violations and other issues. An admission of wrongdoing from Grant Thornton, and a $3 million fine, was part of the settlement. In addition, Grant Thornton had to disgorge more than $1.5 million in audit fees and prejudgment interest. Two managing partners for Grant Thornton’s Wisconsin practice settled with the SEC – Melissa Koeppel and Jeffrey Robinson. Neither admitted...

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Starr Austen and Miller is Investigating Auto Service Agency’s Direct Mail Solicitation Practices

Starr Austen & Miller is investigating Auto Service Agency’s direct mail advertising practices for possible statutory violations. Auto Service Agency, based in St. Peters, Missouri, offers vehicle owners service contracts and is not affiliated with any vehicle manufacturer or individual dealer. If you’ve received a direct mail solicitation from Auto Service Agency, listing your vehicle’s make, model and year, please contact Andrew Miller....

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Former JP Morgan Adviser Guilty of $20M Client Theft

In a New York federal court, a former JPMorgan Chase & Co. investment adviser has plead guilty to stealing over $20 million from clients. In addition, he has admitted to squandering funds on unprofitable trades and personal expenses. Michael Oppenheim, 49, plead guilty to embezzlement and securities fraud on November 5, 2015. He also agreed to hand over $22.4 million in forfeiture. Oppenheim faces between 8 to 10 years in prison. He may not appeal any sentence within or below that range. Charged in a criminal complaint earlier this year, Oppenheim has been in home detention – his movements monitored by a GPS...

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SEC Identifies Lack of Compliance Programs

Investment adviser firms’ growing use of outside chief compliance officers has prompted the U.S. Securities and Exchange Commission to identify several that are not effectively implementing compliance programs. The Office of Compliance Inspections and Examinations has detailed the results of over a dozen examinations conducted by the SEC of investment advisers and investment companies’ CCOs. While some were found to be generally effective in administering compliance programs, others failed to ensure that the advisers adhered to compliance policies, as well as other issues. A risk alert issued by the OCIE cautioned funds and advisers with outsourced CCOs to make certain that...

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Fidelity Charged with Unethical Behavior

Generating fees for the firm and unregistered advisers has been deemed unethical behavior by the commonwealth of Massachusetts. According to a statement from the secretary of commonwealth, William Galvin, at least 13 unregistered Massachusetts investment advisers used Fidelity’s broker-dealer platform. Gavin said, “Fidelity served as a haven from regulatory oversight as it ignored blatant unregistered investment advisory activity.” Fidelity has issued a public statement defending itself. Adam Banker, a Fidelity spokesman said, “We do not believe that Fidelity has violated any laws or regulations in connections with this matter. We look forward to reviewing the details of this matter and addressing them...

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