On May 11, 2017, the Securities and Exchange Commission (“SEC”) charged Walter Little, a former partner at an international law firm, and his neighbor with making more than $1 million in illicit profits by insider trading around corporate announcements.

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On April 24, 2017, the Securities and Exchange Commission (“SEC”) deemed it necessary and appropriate for the protection of investors that public administrative proceedings be, and hereby are, instituted pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Exchange Act”) against Axesstel, Inc.

After an investigation, the Division of Enforcement alleges that Axesstel, Inc., a Nevada corporation located in San Diego, California with a class of securities registered with the SEC pursuant to Exchange Act Section 12(g). Axesstel, Inc. is delinquent in its periodic filings with the SEC, having not filed any periodic reports since it filed a Form 10-Q for the period ended September 30, 2013, which reported a net loss of $7.5 million for the prior nine months. As of April 5, 2017, the company’s stock was quoted on OTC Link operated by OTC Markets Group, Inc., had six market makers, and was eligible for the “piggyback” exception of Exchange Act Rule 15c2-11(f)(3). Axesstel has repeatedly failed to meet its obligations to file timely periodic reports, and failed to heed a delinquency letter sent by the Division of Corporation Finance requesting compliance with Axesstel’s periodic filing obligations. Read More

On April 24, 2017, the Securities and Exchange Commission (“SEC”) deemed it appropriate to issue an order of forthwith suspension of Jared Galanis pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice (17 C.F.R. § 200.102(e)(2)), which states that “any person who has been convicted of a felony . . . shall be forthwith suspended from appearing or practicing before the Commission.”

The SEC found that Jared Galanis was an attorney admitted to practice law in the state of New York until he resigned on March 2, 2017. He became an inactive member of the State Bar of California on August 29, 2016. On September 24, 2015, the SEC filed a civil action against multiple defendants, including Jared Galanis, for violations of the federal securities laws. The SEC alleged that Jared Galanis contributed to a fraudulent scheme to dump millions of shares of Gerova Financial Group, Ltd. (“Gerova”) stock in an unregistered offering and distribution by, inter alia, assisting in the depositing of Gerova stock in U.S. brokerage accounts, placing orders to sell the stock into the public U.S. markets, and allowing access to his attorney trust account for the transfer of proceeds from the sales. Read More

On April 21, 2017, the Securities and Exchange Commission (“SEC”) deemed it appropriate and in the public interest that public administrative proceedings are instituted against Mark McKinnies pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice. Rule 102(e)(3)(i) provides that: The SEC, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the SEC, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.

In anticipation of the institution of these proceedings, Mark McKinnies has submitted an Offer of Settlement which the SEC has determined to accept. Mark McKinnies consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the SEC’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. Read More

On April 25, 2017, the Securities and Exchange Commission (“SEC”) charged Matthew Krimm, a former mortgage loan officer, with defrauding investors, including mortgage loan customers of his former employer.

The SEC’s complaint, filed in federal court in Wilmington, Delaware, charges Matthew Krimm and the company he owned, Krimm Financial Services, LLC (KFS), with fraudulently inducing at least 25 investors to invest more than $1.69 million with Matthew Krimm and KFS in an unregistered offering of promissory notes. The complaint alleges that Krimm and KFS falsely claimed that they owned and operated their own highly successful mortgage loan business. The complaint also alleges that Matthew Krimm and KFS deceived investors by providing them with misleading offering documents, false income statements and false revenue and profit projections, all of which gave the false impression that KFS was operating a profitable business. According to the complaint, Krimm and KFS also falsely claimed that the monies raised would be used by KFS to expand its mortgage loan business, including opening new offices, hiring new loan officers and expanding its reverse mortgage lending business. The complaint alleges that, contrary to what investors were told, Matthew Krimm and KFS operated no mortgage lending business of their own, and they used over 75% of the money from new investors to pay Matthew Krimm’s personal expenses and to pay back prior investors to maintain the appearance that KFS was performing profitably.
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On April 25, 2017, the Securities and Exchange Commission (“SEC”) charged Demitrios Hallas, a former broker, with knowingly or recklessly trading unsuitable investment products in the accounts of five customers and misappropriating more than $170,000 from one of those customers.

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On April 25, 2017, the Securities and Exchange Commission (“SEC”) announced an award of nearly $4 million to a whistleblower who tipped the agency with detailed and specific information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.

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On April 24, 2017, the Securities and Exchange Commission (“SEC”) charged Avaneesh Krishnamoorthy, a vice president in the risk management department of a New York-based investment bank, with insider trading on confidential information he learned in advance of a private equity firm’s acquisition of a publicly-traded technology company.

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On April 24, 2017, the Securities and Exchange Commission (“SEC”) announced fraud charges against Kevin Amell, a Massachusetts-based portfolio manager accused of diverting at least $1.95 million to his personal brokerage account from a fund over which he had trading authority.

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On April 24, 2017, the Securities and Exchange Commission (“SEC”) announced that two former executives at Hungarian-based telecommunications company Magyar Telekom have agreed to pay financial penalties and accept officer-and-director bars to settle a previously-filed SEC case alleging they violated the Foreign Corrupt Practices Act (FCPA).

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On April 21, 2017, the Securities and Exchange Commission (“SEC”) has charged two brothers – Kent and Mike Watts – with orchestrating a fraudulent scheme to qualify the stock of Hydrocarb Energy Corporation for listing on a major stock exchange, which supposedly would assist the Watts in raising capital for the company and facilitate their profitable exit strategy.

The SEC’s complaint, filed in federal court on February 17, 2017 in Houston, Tex., alleges that Kent Watts signed and filed a misleading Schedule 13D with SEC, which failed to disclose the brothers’ plan to take control of Hydrocarb. The complaint further alleges that both Watts executed sham transactions – including one with Kent Watts’s nephew, Kirby Caldwell – which allowed them to secretly control millions of shares of Hydrocarb stock. The SEC contends that Kent Watts misled Hydrocarb’s outside auditor about key details of these transactions, including the Watts’s continued control over the shares transferred to Caldwell. The SEC alleges that Watts’s machinations ultimately were unsuccessful, since Hydrocarb was never listed on a major exchange and filed bankruptcy in April 2016. Read More

On February 2, 2017, Robert Stewart (CRD #5746657, Dewey, Arizona) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) in which he was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in any capacity for four months.

Without admitting or denying the findings, Robert Stewart consented to the sanctions and to the entry of findings that he falsified documents and caused his member firm to have inaccurate books and records by submitting customer account transfer forms using photocopied signatures. The findings stated that Robert Stewart obtained customer signatures on blank account transfer forms and attached photocopies of the corresponding signature pages to other account transfer forms he completed and submitted to the firm. Stewart submitted to the firm customer account transfer forms that these customers did not actually sign (or review) and caused the firm to maintain documents that inaccurately appeared to have been signed by customers. The findings also stated that Robert Stewart exercised discretion by accepting the instructions of unauthorized third-parties and failing to confirm the customer orders. Read More

On February 9, 2017, Brian Scarpellini (CRD #6320844, Plainsboro, New Jersey) was named a respondent in a FINRA complaint alleging that he converted funds totaling $1,158 from his member firm’s bank affiliate by engaging in a check-kiting scheme.

The complaint alleges that Brian Scarpellini wrote checks totaling $1,167 from a personal bank account and deposited those checks into his personal accounts at his firm’s bank affiliate knowing that he had insufficient funds in his personal bank account at the other bank to cover those checks. Brian Scarpellini then used the funds generated from cashing the checks for his personal use, overdrawing his bank account at the affiliate by $1,158. Brian Scarpellini has not repaid the affiliate even though he has received sufficient funds to do so.

FINRA’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because these complaints are unadjudicated, you may wish to contact the respondents before drawing any conclusions regarding the allegations in the complaint. Read More

On February 24, 2017, Austin Morton (CRD #5538108, Spiro, Oklahoma) was named a respondent in a FINRA complaint alleging that he converted a total of $36,000 from a former elderly customer with dementia.

The complaint alleges that Austin Morton first took $20,000 in cash from the customer shortly after the customer, accompanied by Morton, had withdrawn the cash from his bank account. The customer then agreed to loan Austin Morton $6,000 for medical expenses that were never incurred. In accepting the loan, Morton took a signed but otherwise blank check from the customer and made the check out for $22,000 instead of the agreed-upon $6,000, thus converting $16,000 the customer had not authorized. The complaint also alleges that Morton engaged in an undisclosed outside business activity. Without providing his member firm with prior written notice, he accepted $2,000 in cash from the customer as compensation for assisting the customer with locating and surrendering an annuity he held at another firm.

Issuance of a disciplinary complaint represents FINRA’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because these complaints are unadjudicated, you may wish to contact the respondents before drawing any conclusions regarding the allegations in the complaint. Read More

On February 1, 2017, Rosemary McGinley (CRD #2435216, Doylestown, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) in which she was suspended from association with any FINRA member in any capacity for 10 business days.

In determining the sanction, FINRA considered the fact that Rosemary McGinley’s member firm separately suspended and fined her for the same conduct. Without admitting or denying the findings, McGinley consented to the sanction and to the entry of findings that she failed to follow her firm’s procedures when, in order to facilitate two separate wire transfer requests made by an individual posing as a firm customer, she accepted trade orders from an imposter via email and failed to obtain the customer’s verbal authorization to place the trades. The findings stated that a firm branch office received four email requests to transfer funds from the customer’s account to multiple outside bank accounts. Unbeknownst to the registered representative for the account, these requests did not come from the customer but from the imposter who had gained unlawful access to the customer’s email. Read More

On February 1, 2017, Legend Securities, Inc. (CRD #44952, New York, New York) was named a respondent in a FINRA complaint alleging various claims arising from failures in the firm’s compliance and supervisory systems and procedures.

The complaint alleges that Legend Securities failed to report to FINRA, or failed to timely report, 96 customer complaints sent primarily by electronic mail (some of which were reported more than two years late), and that the firm also failed to timely file amendments to Forms U4 or U5 to report arbitrations and complaints against Legend Securities and its associated persons asserting sales practice violations. The complaint also alleges that the firm failed to establish, maintain and enforce reasonable supervisory systems regarding these matters and for the review of electronic correspondence. The complaint further alleges that Legend Securities failed to establish, maintain and enforce a reasonable supervisory system for heightened supervision in light of the fact that on numerous occasions it failed to consider whether representatives with histories of customer complaints, disciplinary actions or other allegations of misconduct should be placed on heightened supervision. In addition, the complaint alleges that Legend Securities charged customers “handling fees”—which were identified on customer confirmations separate from commissions charged on the transaction—but failed to disclose that such fees, which totaled $870,000 for the relevant period, were in reality additional commissions retained by the firm and not per-ticket, transactional charges. For this conduct, the complaint alleges that the Firm willfully violated Section 10(b) of the Exchange Act and Rule 10b-10. Read More

On February 22, 2017, Albert Fried & Company, LLC (CRD #1914, New York, New York) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) in which the firm was censured and fined $27,500.

Without admitting or denying the findings, Albert Fried & Company consented to the sanctions and to the entry of findings that it failed to report 28 short positions totaling 8,757,100 shares in foreign-listed securities that shared a common International Securities Identification Number (ISIN) with a U.S.-listed or traded security. The findings stated that Albert Fried & Company’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations and FINRA rules. Albert Fried & Company’s WSPs failed to provide for one or more of the minimum requirements for adequate WSPs concerning short interest reporting, including the reporting of foreign-listed securities, under FINRA Rule 4560. Read More

On February 9, 2017, Alejandro Falla (CRD #5064828, Miami, Florida) submitted an AWC in which he was barred from association with any FINRA member in any capacity.

Without admitting or denying the findings, Falla consented to the sanction and to the entry of findings that he failed to disclose the use of non-market foreign exchange (FX) rates in connection with a series of bond swap transactions in retail customer accounts. The findings stated that Falla’s member firm, operating through Alejandro Falla, executed numerous retail customer transactions with inaccurate valuations when converted into U.S. dollars, which affected multiple customer accounts. Falla either manually or caused firm personnel to input non-market FX rates for bond swap transactions in his customer accounts. Read More

Jay Hatton (CRD #1725472, Edinburgh, Indiana) submitted an Offer of Settlement in which he was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in any capacity for two years. Without admitting or denying the allegations, Jay Hatton consented to the sanctions and to the entry of findings that he willfully failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose criminal matters, a judgment and a lien.

The findings stated that Jay Hatton made material misrepresentations and failed to disclose material information to his member firm on its 2010, 2011, 2012 and 2013 Advisor Questionnaires. Jay Hatton falsely answered “no” to the questions that asked, “Do you have any outstanding judgments/liens?” and “Is your current CRD U4 outdated, inaccurate or incomplete in any material respect?” The findings also stated that Jay Hatton failed to appear and provide FINRA with requested testimony in connection with an investigation regarding his failure to disclose certain material events on his Form U4. The suspension is in effect from February 21, 2017, through February 20, 2019. Read More

Lightspeed Trading, LLC (CRD #35519, New York, New York) was named a respondent in a FINRA complaint alleging that it failed to establish, document, and maintain an adequate system of risk management controls and supervisory procedures, including certain pre-trade and post-trade risk controls, to ensure compliance with applicable federal securities laws and regulations and FINRA rules.

The complaint alleges that Lightspeed Trading failed to establish a system of reasonable supervision, including adequate WSPs, by failing to have sufficient procedures for the review of orders entered by firm customers, and failed to maintain systems to surveil for potentially manipulative trading activity. As an introducing broker, Lightspeed Trading was responsible for monitoring and reviewing its customers’ order flow to detect and report suspicious and potentially manipulative trades, and to ensure that order flow entered by the firm’s customers complied with applicable federal securities laws and regulations and FINRA rules. Through multiple industry-wide notices published during the relevant period, the firm was on notice of its obligations and responsibilities to implement risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory and other risks of its market access business. Despite the applicable rules and notices, the firm failed to adequately surveil for, and prevent, potentially manipulative trading activity by its customers. Read More

J.W. Korth & Company, Limited Partnership (CRD #26455, Lansing, Michigan) was ordered to pay the approximate amount of $29,268, plus interest, in restitution to customers and in lieu of a fine, is required to retain an independent consultant with experience in establishing pricing procedures for sales and purchases of debt securities to review the firm’s pricing procedures with a view towards ensuring that the firm does not charge prices in excess of what is fair and reasonable, taking into consideration all relevant factors.

Any restitution that J.W. Korth & Company is not able to pay to a customer must be paid to FINRA, without interest, as a fine. The sanctions were based on findings that J.W. Korth & Company charged excessive markups on sales of municipal bonds and corporate bonds, and excessive markdowns on purchases of corporate bonds. The findings stated that the various markups and markdowns were not fair and reasonable. OHO dismissed allegations that the firm charged excessive markups or markdowns relating to three sales of collateralized mortgage obligations, six sales of municipal bonds and two sales of corporate bonds. This matter has been appealed to the NAC and the sanctions are not in effect pending review. Read More

On February 2, 2017, the Financial Industry Regulatory Authority (“FINRA”) accepted a Letter of Acceptance, Waiver and Consent (“AWC”), from BMA Securities, LLC (CRD #108219, El Segundo, California). BMA Securities was censured and fined $25,000.

Without admitting or denying the findings, BMA Securities consented to the sanctions and to the entry of findings that on 110 occasions, it accepted a short sale order in an equity security from another person, or effected a short sale in an equity security for its own account, without borrowing the security, or entering into a bona-fide arrangement to borrow the security; or having reasonable grounds to believe that the security could be borrowed so that it could be delivered on the date delivery is due; and documenting compliance with Rule 203(b)(1) of Regulation SHO. Read More

Fox Financial Management Corporation (CRD® #134277, Carrollton, Texas), Brian Murphy (CRD #4743164, Frisco, Texas) and James Rooney Jr. (CRD #1857754, Carrollton, Texas) were expelled from FINRA® membership and fined $100,000.

Murphy was fined $25,000, barred from association with any FINRA member in any principal or supervisory capacity, and suspended from association with any FINRA member in any capacity for three months. Rooney was fined $50,000, barred from association with any FINRA member in any principal or supervisory capacity, and suspended from association with any FINRA member in any capacity for six months. The National Adjudicatory Council (NAC) affirmed the findings and modified the sanctions following appeal of an Office of Hearing Officers (OHO) decision. Read More

On April 20, 2017, the Financial Industry Regulatory Authority (FINRA) announced that FINRA’s Securities Helpline for Seniors^®,  their senior helpline, marked its second anniversary with $4.3 million in voluntary reimbursements to callers since its launch on April 20, 2015.

Susan Axelrod, Executive Vice President, Regulatory Operations, said, “FINRA is committed to protecting senior investors, and our dedicated helpline staff has done a great job responding to callers’ questions, recognizing and addressing concerns around certain products and issues, and promptly escalating relevant matters. The helpline’s success is also due in large part to firms that are proactively assessing issues raised to them by senior helpline staff and making customers whole where appropriate.” Read More

On April 19, 2017, the Securities and Exchange Commission (“SEC”) charged Matthew Fox of Plano, Texas and his company, Wayne Energy, LLC, with securities fraud arising from a failed offering of interests in a joint venture formed to rework and recomplete an oil and gas well in Upshur County, Texas.

The SEC’s complaint, filed in federal district court in Sherman, Texas, alleges that Matthew Fox raised approximately $950,000 for this joint venture between March 2015 and October 2016. The complaint alleges that Fox had previously operated another oil and gas company – Frisco Exploration Company – but formed Wayne Energy in March 2015, after Frisco Exploration failed. Wayne Energy was to be the manager of the joint venture. The SEC further alleges that, to raise funds for the joint venture, Fox simply recycled offering documents he had used at Frisco Exploration. But, according to the SEC’s complaint, other than occasionally changing the names of the entities, Matthew Fox did not customize the offering documents to the joint venture’s business or risks. And, according to the SEC, these offering documents falsely stated that Wayne Energy would not commingle its funds with those of the joint venture, and that Wayne Energy was an operator licensed with the Texas Railroad Commission, neither of which statements was true. Read More

In October of last year, the Securities and Exchange Commission (“SEC”), adopted final rules (1) amending Rule 147, also known as Intrastate Crowdfunding and Rule 504 under the Securities Act of 1933, as amended (the “Securities Act”),  and (2) establishing a new Securities Act exemption designated Rule 147A.  Amended Rule 147 and new Rule 147A took effect on April 20, 2017, and amended Rule 504 took effect on January 20, 2017. As amended, Rule 147 facilitates offerings relying on intrastate crowdfunding exemptions under state securities laws. Further, Rule 147A further accommodates offers accessible to out-of-state residents and companies that are incorporated out-of-state.

On April 19, 2017, the SEC issued a new compliance and disclosure interpretation addressing intrastate crowdfunded offerings under new Rule 147A under the Securities Act. The new Intrastate Crowdfunding compliance and disclosure interpretation provides that under Rule 147A(g)(1), offers and sales made in reliance on Rule 147A will not be integrated with prior offers and sales of securities. The issuer must still comply with all applicable state securities law requirements. Read More

On April 17, 2017, the Securities and Exchange Commission (“SEC”) charged a New York-based investment adviser, Hyaline Capital Management, LLC, and one of its founders, Justin Meadlin, with disseminating false information to prospective investors and clients in order to induce them to invest money with them.

The case arose from the SEC’s Aberrational Performance Inquiry, an initiative led by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Read More

One of the most important decisions for a company going public is to choose the right market for listing the company’s shares. This is true for initial public and direct public offerings. The New York Stock Exchange (“NYSE”) provides the opportunity to maximize liquidity, encourage market activity, and trade securities efficiently.

The NYSE and NYSE MKT offer innovative, high-speed technology enhanced by the commitment of capital from traders who are accountable to the company. This market structure provides price discovery at the open, the close, and during periods of volatility, including periods of market dislocation. For NYSE companies, Designated Market Makers (“DMMs”) add significant liquidity to the market, which is further enhanced by supplemental liquidity providers (“SLPs”) and floor brokers equipped with new, algorithmic trading tools. The judgement of the DMM and commitment of capital at the point of sale distinguishes the NYSE from other markets. Read More

At 9:30 a.m. EDT on April 12, 2017, the Securities and Exchange Commission  announced the temporary suspension of trading in the securities of Sunshine Capital, Inc. (“SCNP”), of Hollywood, Florida, terminating at 11:59 p.m. EDT on April 26, 2017.

The Commission temporarily suspended trading in the securities of Sunshine Capital because of questions regarding the accuracy of assertions by Sunshine Capital in press releases to investors concerning, among other things, the liquidity and value of the company’s assets, namely DIBCOINS, a cryptocurrency. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). The Commission cautions broker-dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by Sunshine Capital. Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. Read More

At 9:30 a.m. EDT on April 13, 2017, the Securities and Exchange Commission announced the temporary suspension of trading in the securities of Bingo Nation Inc. , of Las Vegas, Nevada and terminating at 11:59 p.m. EDT on April 27, 2017.

The Commission temporarily suspended trading in the securities of Bingo Nation because of concerns regarding the accuracy and adequacy of publicly available information in the marketplace and potentially manipulative transactions in Bingo Nation’s common stock. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). The Commission cautions broker-dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company. Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. Read More