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What is the “Fraud-on-the-Market” Doctrine of Securities Fraud?

In the United States Supreme Court case of Basic, Inc. v. Levinson, 485 U.S. 224 (1988), the Court ruled that in certain circumstances a securities class action would be appropriate notwithstanding what otherwise would be individualized issues of reliance.  Basic created the Fraud-on-the-Market Doctrine. The Fraud-on-the-Market Doctrine pertains to the reliance element of the federal section 10(b) claim.  Because 10(b) claims require reliance, courts historically had found class wide treatment was inappropriate in Section 10(b) claims because individualized reliance issues would predominate, precluding class certification under Federal Rule 23(b)(3).  In Basic, the United States Supreme Court created a solution to this...

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SEC’s Office of Compliance Inspections and Examinations Identifies Frequent Advisor and Brokerage Firm Shortcomings

Starr Austen & Miller has represented over a thousand victims of either investment advisor negligence or stockbroker fraud.  In almost every case the guilty advisor or broker failed to comply with his firm’s own compliance manual.  Typically, such conduct has been ongoing for years and the brokerage firm has chosen to pay lip service to its compliance rules and procedures by not truly watching its broker with sufficient care or otherwise properly supervising the broker’s bad conduct.  In essence, the compliance manual becomes a worthless piece of paper the brokerage firm shows the regulators in an effort to show that...

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Indiana settles with securities firm over agent who ran Ponzi scheme

By: Indianapolis Business Journal Staff and Associated Press The state has reached a $275,000 settlement with NYLife Securities LLC over the activities of an Indiana wealth manager who killed himself in 2013 while being investigated for operating a Ponzi scheme that took millions of dollars from dozens of investors. Indiana Secretary of State Connie Lawson announced the settlement Thursday. Former NYLife agent Richard Schwartz operated a Kokomo-based company called RAS & Associates that sold investments totaling $16.3 million to 53 Indiana investors. The state says most of that money was never invested but went to support Schwartz’s “extravagant lifestyle” and an apparent gambling problem. Attorney...

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Oil Futures Trader Gets 10 Years For $1.4M Ponzi Scheme

By Matthew Guarnaccia of Law360.com Texas federal judge on Tuesday sentenced a New York-based oil futures trader to 10 years in prison for orchestrating a Ponzi scheme in relation to his operation commodity pool, which took more than $1.4 million from investors. U.S. District Judge Lynn Hughes handed down the 120-month sentence to 33-year-old Christopher Donrick Daley, who was convicted of one count of mail fraud and three counts of wire fraud following a two-day jury trial in September. Judge Hughes also ordered Daley to pay $614,950 in restitution. He will serve three years of supervised release after his time in prison. The...

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Securities watchdog bans second broker in alleged Veros Ponzi scheme

By: Jared Council of Indianapolis Business Journal Financial industry regulators have permanently barred a local broker alleged to have participated in a Ponzi scheme. The Financial Industry Regulatory Authority said Tobin Joseph Senefeld of Indianapolis has been disbarred from associating with any FINRA member institution, according to its monthly disciplinary report released last week. The sanction is related to a 2015 civil suit filed by the Securities and Exchange Commission that claimed Senefeld and two others operated a multimillion-dollar Ponzi scheme involving farm loans. According to FINRA, Senefeld was banned because he refused to provide on-the-record testimony about the Ponzi scheme allegations. Senefeld,...

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U.S. Attorney announces that the Southern District of Indiana has collected 7.7 million dollars in criminal and civil actions in 2016

U.S. Attorney Josh J. Minkler recently announced that his federal office collected for the Southern District of Indiana (from Indianapolis to the Kentucky border) a total of $7,707,955 in criminal and civil actions in fiscal year 2016.  Securities fraud attorney, Scott Starr, had this to say about the announcement: “This demonstrates that even in good markets, securities fraud continues.  Bad stockbrokers and financial advisors will always be with us taking advantage of the elderly and victimizing their clients to satisfy their own greed.”  The law firm of Starr Austen & Miller has been representing the victims of securities fraud since 1982.  The...

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New Albany, Indiana Man Arrested on Multiple Counts of Securities Fraud and Theft

By Lindsey Holmes of tristatehomepage.com A New Albany man is in jail Thursday night after a 13-month investigation revealed he defrauded nearly $535,000 from numerous Dubois County Residents. In October 2015, a complaint was filed with the Indiana Secretary of State, Securities Division after a woman became concerned about the financial investments made on behalf of her mother. A criminal investigation was initiated by the Indiana State Police into the transactions by the woman’s financial advisor, 58 year old Stephen Recker, formerly of Jasper and currently of New Albany. Through the course of the investigation and as a result of the initial complaint, investigators...

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Whistleblower Tips, Recoveries on the Rise

By Michael Petro -- Buffalo Law Journal Statutory enactments by federal financial regulatory and various state enforcement agencies have made it easier, safer and financially enticing for employees and former employees to report corporate wrongdoing. According to the U.S. Securities and Exchange Committee, whistleblower tips have been on the increase over the past few years as legislation has provided whistleblowers incentives to report fraud to the Securities and Exchange Commission and Commodity Futures Trading Commission and give protection against retaliation and disclosure of their identities. The SEC, using the whistleblower program developed after the recession in 2010 under the Dodd-Frank Act, has...

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Biz Group Loses Stay Bid In DOL Fiduciary Rule Challenge

By Y. Peter Kang of Law360.com A D.C. federal judge on Wednesday denied a renewed request by a financial services industry group to block the U.S. Department of Labor’s rule expanding the definition of a fiduciary for retirement account investment advisers, saying the court had already determined the DOL's interpretation was reasonable. U.S. District Judge Randolph D. Moss denied the National Association for Fixed Annuities’ bid for a preliminary injunction blocking enactment of the rule while the group appeals his earlier ruling that rejected their case on the merits, saying NAFA isn’t likely to win the appeal. Having already determined that the DOL’s...

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