September 2020 SEC Updates

On September 30, 2020, Morgan Stanley & Co. LLC agreed to settle charges against for violations of Regulation SHO, the regulatory framework governing short sales.  Morgan Stanley hedged synthetic exposure to swaps by purchasing or selling the securities referenced in the swaps, and it separated its hedges into two aggregation units – one holding only long positions, … Read More

August 2020 SEC Updates

On August 27, 2020, Aldo Marchena was barred from association with an investment adviser and broker-dealer.  In connection with that plea, Aldo Marchena admitted that between October 2016 and January 2017, he stole more than $1 million from a client. To conceal this fraud, Marchena created and provided to his client fake account statements that purported to show the … Read More

SETTLEMENT FOR BIRINYI ASSOCIATES

On July 31, 2020, Birinyi Associates settled a enforcement action for allocating profitable day trades in a manner that was unfair to certain clients and inconsistent with the firm’s disclosures and internal policies. [https://www.sec.gov/litigation/admin/2020/ia-5555.pdf] … Read More

PONZI SCHEME EXPOSED

On July 30, 2020, the SEC charges former Georgia State Legislator with defrauding investors in a Ponzi scheme.  [https://www.sec.gov/news/press-release/2020-168] … Read More

NEW EERT ESTABLISHED AS QUICK RESPONSE TEAM

On July 28, 2020, the SEC announced the creation of the Event and Emerging Risks Examination Team (EERT) in the Office of Compliance Inspections and Examinations (OCIE). The EERT will proactively engage with financial firms about emerging threats and current market events and quickly mobilize to provide expertise and resources to the SEC’s regional offices when critical matters arise. Working with … Read More

VFA SETTLES ON BREACH CASE

On July 28, 2020, the VALIC Financial Advisors, Inc. (“VFA”) settled an enforcement action for breaching its fiduciary duty to its clients in connection with its mutual fund share class selection practices with regard to its receipt of revenue sharing, avoidance of transaction fees, and receipt of compensation pursuant to Rule 12b-1, as well as its … Read More

INVESTMENT ADVISOR CHARGED WITH FRAUD FOR STEALING FROM CLIENTS

On July 20, 2020, the SEC charged former registered representative and investment adviser with fraud for stealing from brokerage customers and an elderly advisory client. The SEC’s complaint alleges that the financial advisor falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to … Read More

UBS AGREES TO OVER $10 MILLION IN PENALTIES

On July 20, 2020, the SEC announced that UBS Financial Services has agreed to pay more than $10 million to resolve charges that it circumvented the priority given to retail investors in certain municipal bond offerings.  According to the SEC’s order, over a four-year period, UBS improperly allocated bonds intended for retail customers to parties known in the … Read More

OFFICE OF COMPLIANCE BEGINS NEW PROCESS

In July 2020, the Office of Compliance Inspections will begin examinations to assess compliance with Form CRS. On July 27 2020, the SEC Staff Standards of Conduct Implementation Committee began reviewing relationship summaries from a cross-section of firms to assess compliance with the content and format requirements of Form CRS.  However, the Committee’s initial reviews have … Read More

DAVID HU CHARGED WITH FRAUD FOR ROLE IN PONZI-LIKE SCHEME

On July 17, 2020,  the SEC charged David Hu, the co-founder and chief investment officer of International Investment Group LLC (IIG), a former registered investment adviser, with fraud for his role in a $60 million Ponzi-like scheme. The SEC’s complaint alleges that Hu orchestrated multiple frauds on IIG’s investment advisory clients. According to the complaint, Hu grossly overvalued … Read More