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Thirteen Firms Sanctioned for Improper Sales of Puerto Rican Bonds

The Securities and Exchange Commission (SEC) recently fined 13 financial firms for selling risky Puerto Rican bonds to retail clients beneath the minimum allotment of $100,000 for a single transaction. To shut out small investors and protect those who may not be able to withstand large losses on risky offerings, the SEC mandates that municipal bonds can only be sold in a ‘minimum denomination’ of $100,000 per transaction. But earlier this year, an SEC investigation into the trading of securities from a $3.5 billion Puerto Rican junk-bond offering found 66 incidents of sales under $100,000. The general-obligation deal represents the largest speculative-grade...

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Star Brokers’ Wings Clipped by Increased Regulatory Scrutiny

A widely accepted reality of the financial industry is that management typically turns a blind eye to potential indiscretions of star brokers -- the top 1 percent. This is to avoid antagonizing the agents who bring in humungous amounts of money in fees and commissions. But big producers are now facing tough questions from regulators about alleged violations. Three recent terminations of star producers have brought the issue to the fore. Merrill Lynch recently fired Stephen S. Brown and James P. Goetz, allegedly for not disclosing outside business activities and participating in private transactions involving clients. The transactions allegedly involved non-Merrill Lynch...

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SEC Requiring More Data — Firms Need to Refocus on Compliance

Examiners with the Securities and Exchange Commission (SEC) are poring over much more data from advisory firms, and are able to use predictive analytics to identify warning signs of a likely violation. This was the essence of a speech given by John Walsh, a partner with Sutherland, Asbill & Brennan, at a recent Schwab Impact conference in Denver, Colo. Walsh spent 23 years at the SEC before entering private practice. Examiners are using a new analysis tool that looks at 27 different areas of data from advisory firms. According to a securities lawyer, the use of ‘big data’ has fundamentally changed the...

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Adviser Found Guilty for Stealing Nearly $1 Million

Former Ameriprise Financial Inc. adviser Susan Walker recently pleaded guilty to defrauding 24 clients of $980,000. Walker used the money to pay for personal expenses, including vacations and private school tuition. The U.S. Attorney's Office for the District of Minnesota reported that the alleged incidents occurred between 2008 and 2013. According to the complaint filed by the U.S. Attorney's Office for the District of Minnesota, Walker opened investment accounts in her own name and in the names of several clients without their permission. She then withdrew money from clients' accounts, deposited it into the accounts she controlled, and then withdrew the money...

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Prepare for the Unexpected: Your Succession Planning Portfolio

You may dream of someday passing down your family farm and your legacy to the next generation, but are you taking the necessary steps to prepare for that handoff? When it comes to successful succession planning, you do need more than a will – there are other important documents you must consider and open, ongoing communication is a must. According to attorney Polly Dobbs, "This process doesn’t have to be overwhelming. Farmers should begin by asking themselves: ‘What if I get hit by a bus?’ Then draft your succession plan like that life­-changing event is going to happen tomorrow. The hard work...

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SEC Amasses Record Enforcement Actions in 2014

With a record number of actions taken and fines levied, the Securities and Exchange Commission (SEC) experienced its most prolific year for enforcement in 2014, thanks to new investigative methods and innovative technology. According to the SEC’s preliminary figures, the agency filed 755 enforcement actions and obtained orders totaling $4.16 billion in disgorgement and penalties in fiscal 2014, which ended Sept. 30. In 2012, 686 actions and $3.4 billion were recorded, and 734 actions taken. SEC Chairman Mary Jo White said that aggressive enforcement against wrongdoers who harm investors and threaten our financial markets remains a top priority of the SEC. She...

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Former Wells Officer Charged and Fired for Covering Up Insider Trading

The Securities and Exchange Commission (SEC) recently charged Judy Wolf, a former compliance officer at Wells Fargo Advisors, for improperly altering a document. The SEC alleges that Wolf altered a document before it was provided to the SEC during its investigation into a former broker’s inside trading. Wells broker, Waldyr Da Silva Prado Neto, allegedly operated a scheme that made more than $2 million from insider trades in Burger King Holdings Inc. stock ahead of an acquisition announcement in Sept., 2010. Wolf was responsible for identifying potentially suspicious trading activity at Wells Fargo Advisors. According to the SEC, she closed the report...

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Former Raymond James Adviser Busted for Stealing $1 Million

An independent contractor with Raymond James Financial Services, Jo Ellen Fisher, has been barred from serving as an investment adviser after allegedly stealing $924,750 from a 95-year-old client to fund personal expenses. In a settlement posted on its website, the Financial Industry Regulatory Authority, Inc. (FINRA), which barred Ms. Fisher, said the illegal transfer of funds took place between July and December of last year. Without her client’s authorization, she transferred securities and funds into a brokerage account under the name of her daughter. What did Ms. Fisher do with the money? According to FINRA, she bought a 2014 Ford Explorer, three...

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SWS Charged with Improper Supervision of VA Transactions

Allowing numerous variable annuity (VA) applications to proceed without being reviewed by a supervisor led the Financial Industry Regulatory Authority Inc., (FINRA) to file charges recently against SWS Financial Services Inc. FINRA claims sales of these annuities comprised 16 to 20 percent of SWS' total revenue from September 2009 to May 2011 when the rule violations occurred. The five charges facing SWS include allegations of: • Inadequate supervisory systems and written supervisory procedures to supervise VA business, • Inadequate supervisory reviews of VA deals, • Failure to have registered principal review of VAs before submitting the application to the insurer, • Failure to have surveillance procedures to detect inappropriate VA exchanges,...

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Axa Broker Charged with Running Ponzi Scheme

Dennis Wright, a former broker at Axa Advisors in Lewistown, Pa, has been charged by the Securities and Exchange Commission (SEC) with running a Ponzi scheme that bilked customers of $1.5 million. In the 14-year-old scheme, which ran between 1998 and 2012, Wright allegedly lured about 28 customers -- including childhood friends and inexperienced investors -- to withdraw funds from Axa variable annuity accounts. Wright promised to transfer the money to an Axa mutual fund managed account with higher returns than the annuities. But Wright deposited the funds into a bank account he controlled and used to pay personal expenses and reimburse customers to whom he owed money. The...

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