The Recent Market Turmoil Spells Trouble for "Auto-liquidators" like Interactive Brokers
(Aug 2015)
Interactive Brokers Group, Inc. (IB) caters to active traders including those who trade futures and options. These active traders' accounts typically are subject to "portfolio margin" requirements which we have written about at length. 1 IB requires its customers to agree to have IB auto-liquidate positions when accounts are in a margin deficit.
IB's auto-liquidation procedures were the focus of a FINRA arbitration earlier this year in which the Claimant, Glen Lyon Long-Term Options, LP,...
Why Citigroup Paid the SEC $180 Million Over MAT/ASTA
(Aug 2015)
I. Introduction
This week Citigroup paid $180 million to the SEC to settle allegations that Citigroup improperly sold high risk hedge funds known as MAT, ASTA and Falcon. The SEC Order is available to view online.
The SEC Order makes clear that Citigroup did not effectively monitor the portfolio manager or the sales force as it sold billions of dollars of high risk MAT ASTA funds with false and misleading sales presentations. In the end, Citigroup lost hundreds of wealthy clients and likely...
Enforcement Actions: Week in Review - July 17th, 2015
(Jul 2015)
SEC ENFORCEMENT ACTIONS
SEC Announces Settlement With Cooperator in Grand Central Post-It Notes Insider Trading Case
July 13, 2015 (Litigation Release No. 143)
The SEC announced a settlement with Frank Tamayo for cooperating in a continuing insider trading investigation where illegal information was passed via Post-It notes at Grand Central Terminal. Tamayo was alleged to distributing received tips from a law firm clerk to a stockbroker that he would meet up with at Grand Central Terminal,...
A Non-traded REIT Investor Fights Back
(Jun 2015)
On June 5, 2015, I wrote that American Realty Capital's latest listing of a non-traded REIT was further evidence of the harm caused by sponsors of non-traded REITs. I also pointed out that, contrary to the common pattern in non-traded REIT listings, Schorsch and ARC used their control of the non-traded REIT version of GNL to tie the hands of shareholders and management in the subsequent GNL traded REIT and to opportunistically transfer wealth to themselves. I pointed out that similar...
Enforcement Actions: Week in Review - June 12th, 2015
(Jun 2015)
SEC ENFORCEMENT ACTIONS
SEC Names Richard R. Best as Regional Director of Salt Lake Office
June 8, 2015 (Litigation Release No. 113)
Richard R. Best will be succeeding Karen Martinez as Regional Director of the SEC's Salt Lake office. Mr. Best's qualifications include: serving as senior director and chief counsel in the Department of Enforcement for FINRA in New York, holding other supervisory and investigative positions within FINRA's Enforcement function, and having 10 years of...
Enforcement Actions: Week in Review - April 17th, 2015
(Apr 2015)
SEC ENFORCEMENT ACTIONS
SEC Halts Investment Scheme Targeting Military Personnel
April 14, 2015 (Litigation Release No. 66)
The SEC has charged Leroy Brown Jr. and his firm, LB Stocks and Trades Advice LLC, with securities fraud and conducting an unregistered securities offering and ordered an asset freeze against Brown. Brown fabricated his stock broking experience to prospective clients telling them that he had many years of experience in securities and that he had all the necessary...
Oil and Gas DPPs From Just Two Sponsors Have Caused $3.7 Billion in Losses
(Feb 2015)
We have written extensively about direct participation programs, or DPPs. See our blog posts on non-traded REITs and our discussion about equipment leasing DPPs. Oil and gas DPPs are another strain of the DPP epidemic: illiquid exposure to an existing underlying asset, loaded with confiscatory fees, conflicts of interest and unnecessary risk.
Oil and gas DPPs use some of investors' money to drill and operate oil and gas wells. Oil and gas DPPs are sponsored and managed either by investment...
Enforcement Actions: Week in Review - February 6th, 2015
(Feb 2015)
SEC ENFORCEMENT ACTIONS
SEC Alerts Investors, Industry on Cybersecurity
February 3, 2015(Litigation Release No. 20)
The SEC released a couple of publications regarding cybersecurity threats at brokerage and advisory firms. One publication focused on how firms should identify risks, establish policies, procedures, and oversight processes, protect networks and information, identify risks associated with remote access to client information and transfer requests, and detect unauthorized...
Enforcement Actions: Week in Review - January 16th, 2015
(Jan 2015)
SEC ENFORCEMENT ACTIONS
SEC Charges Direct Edge Exchanges With Failing to Properly Describe Order Types
January 12, 2015 (Litigation Release No. 2)
In the first case focused on stock exchange order types, the SEC has settled with the EDGA and EDGX exchanges for $14 million over charges that they did not accurately describe their order types. These exchanges, formerly owned by Direct Edge Holdings before being acquired by BATS Global Markets, were found to have offered multiple "price...
