FINRA Enforcement Actions: Month in Review
(Jun 2014)
MAY 2014 SELECTED FINRA ENFORCEMENT ACTIONS
FIRMS FINED
ABN AMRO Clearing Chicago LLC (CRD #14020, Chicago, Illinois)
ABN AMRO Clearing Chicago LLC consented to a censure and $95,000 fine for allegedly failing "to report short interest positions to the New York Stock Exchange and FINRA on certain settlement dates, and submitt[ing] to FINRA an inaccurate short-interest position report." FINRA found that the firm's supervisory system did not provide for supervision reasonably designed to achieve...
FINRA Enforcement Actions: Month in Review
(May 2014)
APRIL 2014 SELECTED FINRA ENFORCEMENT ACTIONS
FIRMS FINED
The Huntington Investment Company (CRD #16986, Columbus, Ohio)
The Huntington Investment Company consented to a $25,000 fine and censure. The firm consented to an entry of "findings that it failed to provide notice to the MSRB via the Electronic Municipal Market Access System (EMMA) that no preliminary official statements or official statements were to be prepared for bond anticipation note offerings in which the firm participated."...
Enforcement Actions: Week in Review - May 16th, 2014
(May 2014)
SEC ENFORCEMENT ACTIONS
SEC Charges Unregistered Securities Salesman for Selling Millions of Dollars in Oil-And-Gas Investments
May 15, 2014, (Litigation Release No. 22993)
According to the complaint, Behrooz Sarafraz "acted as the primary salesman on behalf of TVC Opus I Drilling Program LP and Tri-Valley Corporation" and received over $16 million in sales commissions while failing to be registered with the SEC as a broker-dealer. Sarafraz has agreed to a final judgment that enjoins...
Enforcement Actions: Week in Review - April 4th, 2014
(Apr 2014)
SEC ENFORCEMENT ACTIONS
SEC Charges Two Friends with Insider Trading Ahead of Impending Acquisition Announcement
April 3, 2014, (Litigation Release No. 22965)
According to the complaint, Walter D. Wagner and Alexander J. Osborn traded on insider information they learned from investment banker, John W. Femenia, "about the impending acquisition of The Shaw Group Inc." Wagner has agreed to a settle the charges by "disgorging his ill-gotten gains plus interest, with any additional financial...
The MSRB Re-Writes History
(Mar 2014)
Kyle Glazier and Lynn Hume's story in the Bond Buyer last week, "Brokers Violate Puerto Rico OS, MSRB Rules with Retail Trades", about small denomination trades in the recent Puerto Rico bond offering in contravention of the offering document set off a firestorm. The Wall Street Journal's "Finra Examining Trading in Puerto Rico Bonds" and Bloomberg's "Finra Says It's Examining Trading in New Puerto Rico Bonds" both reported on Friday that FINRA was looking into the suspect trades.
What did...
Municipal Bond Markups are Still Excessive
(Mar 2014)
Monday's Wall Street Journal article, Muni Bond Costs Hit Investors in Wallet: Investors Pay Twice as Much for Municipal Debt as for Corporate Bonds, points out yet again that investors pay far more to buy and sell municipal bonds than they pay to buy and sell similar quantities of corporate bonds or common stocks. The article cites a recent S&P study that finds investors buying a $100,000 municipal bond pays an average spread of 1.73% or $1,730 - twice as much as the 0.87% average spread...
SEC Litigation Releases: Week in Review - March 7th, 2014
(Mar 2014)
SEC Obtains Summary Judgment Win On Liability Against All Defendants in a Penny Stock Fraud Case
March 5, 2014, (Litigation Release No. 22936)
A summary judgment was entered against StratoComm Corporation, its CEO, Roger D. Shearer, and its former Director of Investor Relations, Craig Danzig, for issuing and distributing "public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped...
High Concentration in Puerto Rico Municipal Bonds Results in Losses for Investors in Oppenheimer Rochester Funds
(Feb 2014)
2013 was a tough year for investors in Puerto Rican municipal bonds. Figure 1 shows a broad index of U.S. municipal bonds--the S&P Municipal Bond Index--and a regional index focusing on Puerto Rican municipal bonds--the S&P Municipal Bond Puerto Rico Index. While both indexes moved in tandem from 2000 until 2012, the Puerto Rico index shows a much sharper drop in 2013 as the island's economy continued its prolonged contraction. Puerto Rico's 2012 GDP was 12% below its 2006 GDP, according to...
Further Reckoning of UBS Willow Fund's CDS Losses
(Feb 2014)
In previous blog posts we explained how the UBS Willow Fund completed its spectacular multi-year collapse in 2012 largely as a result of its leveraged portfolio of credit default swap (CDS) contracts. See Credit Default Swaps on Steroids: UBS's Willow Fund and Willow Fund's Hedging, Investing and Speculating in Distressed Debt With Credit Default Swaps. Through these CDS contracts, the Willow Fund made a large, highly-leveraged short bet on credit risk contrary to its repeated SEC...
SEC Litigation Releases: Week in Review - February 14th, 2014
(Feb 2014)
SEC Charges James Y. Lee for Defrauding His Advisory Clients
February 14, 2014, (Litigation Release No. 22927)
According to the complaint, James Y. Lee defrauded his advisory clients in several ways including "charg[ing] some clients fees...based on false performance and conceal[ing] from them that they had actually incurred realized losses," failing to disclose information about his background including "a criminal conviction for embezzlement and an SEC cease-and-desist order for his role in...
