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Securities Fraud

Fidelity Charged with Unethical Behavior

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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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SEC Hammers Down on Securities Fraud, Records Highest Fines in 2015

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The Securities and Exchange Commission targeted multiple types of fraudulent behavior this year as it filed a record high of enforcement actions and fines against individuals and companies, said the agency. The agency obtained $4.2 billion in penalties, resulting in a 7% increase from the previous fiscal year 2014. Kohlberg Kravis Robert & Co. took a massive blow, as the SEC levied actions against them for improperly allocating $17 million in “broken deal” expenses. Also, Edward D. Jones & Co. was penalized for pricing fraud in municipal securities. SEC Provides Transparency in Securities Fraud Cases The agency has been more focused on enforcement, led...

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Adviser Access to Outside Accounts of Clients Forces SEC Hand

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The Securities and Exchange Commission (SEC) is cracking down on advisers who can access their clients’ employer sponsored retirement accounts. Managing director of Graydon Compliance Solutions, Kevin Woodard, has declared that the agency will closely monitor scenarios in which clients have given their advisers usernames and passwords for financial accounts that are not managed by their adviser. At the National Association of Personal Financial Advisors fall conference in Indianapolis, Woodard said, “If you can’t prove you can’t steal from it, you should say you have custody.” Potential for Adviser Abuse The multibillion dollar rip off by Bernie Madoff, who maintained control of...

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$18M to FINRA by 5 Firms for Overcharging Funds

Five broker-dealers have been ordered by the Financial Industry Regulatory Authority to pay more than $18 million in restitution for overcharging charities and retirement funds on mutual fund sales. Among the broker-dealers are Edward D. Jones & Co. LP and Stifel Nicolaus & Co. Inc. The firms failed to waive sales charges on the mutual funds. To date, FINRA has collected $55 million in restitution to return to 75,000 eligible accounts. “These actions are further evidence of our commitment to pursue substantial restitution for adversely affected mutual fund investors who were not afforded the full benefit of available sales charge waivers,” says...

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Settlement of Puerto Rico Investor Claims Costs UBS $2.9 Million

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UBS AG, a Swiss global financial services company, was ordered by the Financial Industry Regulatory Authority Inc. (FINRA) to pay about $2.9 million to two investors in Puerto Rico closed-end municipal bond funds. A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Misrepresentations of Closed-end Funds Ana Teresa Lopez-Gonzales and Andres Ricardo Gomez received about $2.4 million in damages and about $480,000 for attorney’s fees, according to a FINRA filing. Lopez-Gonzales and Gomez were part of...

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Brokers Plead Guilty in Post-It-Note-Eating Insider Trading Case

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In scenes reminiscent of a spy movie, a Brooklyn, New York, mortgage broker showed secret tips written on Post-it notes to a former Morgan Stanley broker, then swallowed the notes. True story! Insider Trading Frank Tamayo pleaded guilty in September 2014 for his role as the middleman in the insider trading case. Tamayo repeatedly met with former Morgan Stanley broker Vladimir Eydelman near the large clock inside the main concourse at New York City’s Grand Central Station to share the stolen data. Eydelman recently admitted guilt in a federal court in Trenton, N.J. Tamayo obtained the stolen information from his law school friend...

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SEC Charges Broker with Inflating Assets and Exaggerating Returns

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Dawn J. Bennett, founder of Bennett Group Financial Services in Washington D.C. and host of the radio show, “Financial Myth Busting,” has been busted by the Securities and Exchange Commission (SEC). The reason? She allegedly inflated her firm’s assets under management by as much as five times the actual amount, and exaggerating investment returns. Inflated Assets Under Management The SEC says that Bennett claimed to have more than $2 billion in assets, but the most money that Bennett Group ever managed was $407 million. In addition, the SEC complaint says that Bennett lauded the firm’s highly profitable investment returns. She allegedly claimed that...

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Squelching ‘Cockroach’ Brokers

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The Financial Industry Regulatory Authority Inc. (FINRA) recently barred 10 brokers for moving from one problem securities firm to another while committing securities violations. This practice is called cockroaching. Broker Misconduct Barbara L. Desiderio, president of the now defunct New York City-based broker-dealer, Global Arena Capital Corp., was barred from the brokerage industry. Regulators claim that Desiderio and five of the firm’s brokers used misleading sales pitches, churning of accounts and other abuses. Two branch managers at Global Arena were barred from serving in a principal capacity, and two others brokers were barred for failing to cooperate with FINRA's investigation. According to a FINRA...

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FINRA Orders Morgan Stanley to Pay $2.4M for Excessive Trading

Here we go again. Responding to the latest round of claims against former Morgan Stanley broker Steven Mark Wyatt, a Financial Industry Regulatory Authority Inc. (FINRA) arbitration panel recently ordered Morgan Stanley to pay at least $2.4 million for unauthorized and excessive trading in the stock market during and after the 2008 financial crisis. Back in 2012, Wyatt was let go from the Ridgeland, Miss., Morgan Stanley brokerage office. But his actions continue to be the subject of cases against the brokerage firm. Excessive Trading A group of physicians and their family members were awarded the $2.4 million judgment after accusing Wyatt of...

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Tom Buck Now Disbarred

Indiana’s top-selling financial advisor from Carmel, Tom Buck, has been barred from working in the securities industry for alleged misconduct that included unauthorized trading for his clients without the clients, or his employer, Merrill Lynch’s, permission. Buck, a former senior vice president of investments at Merrill Lynch, who had been honored numerous times over the years for being one of the top-producing brokers in Indiana, agreed to the disbarment in a consent order he signed last week with the federal Financial Industry Regulatory Authority (FINRA). The FINRA consent decree states that Buck, starting at least since 2009, “pursued unethical and improper business...

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