Archive

August 30, 2021

Cetera Advisor Networks LLC and related entities will pay $300,000 to resolve SEC charges that the investment advisor and broker-dealer violated Regulation S-P regarding the safeguarding of customer records and information and provision of breach notification to customers. The SEC alleged that between November 2017 and June 2020, email accounts of Cetera personnel were taken over by unauthorized third parties, resulting in the exposure of personally identifying information of more than 4,000 Cetera customers and clients.  The accounts were not protected with multi-factor authentication, even though Cetera’s policies required MFA.  SEC

August 17, 2021

Investment advisor Murchinson Ltd., together with associated individuals Marc Bistricer and Paul Zogala, will pay restitution, interest, and penalties totaling nearly $9 million to resolve allegations that they caused a hedge fund client to violate Regulation SHO regarding uncovered short sales and other problematic trading practices.  Respondents allegedly provided erroneous order-marking information, thereby causing the hedge fund brokers to mismark the hedge funds’ sales as “long,” and resulting in their failure to borrow or locate shares prior to executing the sales.  SEC

August 10, 2021

Five companies that operate the BitMEX cryptocurrency platform will pay a total of $100 million to resolve claims that the platform operated a facility to trade or process swaps without being approved as a Designated Contract Market (DCM) or a Swap Execution Facility (SEF), operated as an unregistered futures commission merchant (FCM), and failed to implement anti-money laundering procedures.  HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited jointly operated BitMEX, which offered leveraged trading of cryptocurrency derivatives, including to customers in the U.S.  BitMEX acted as a counterparty in certain transactions, and accepted bitcoin to margin digital asset derivative transactions.  BitMEX allowed customers to access its platform and conduct derivative trading without verifying customer identity beyond the collection of an email address, and failed to report suspicious activity as required. As part of the settlement, BitMEX certified that it terminated its U.S. business operations, barred access to the platform by U.S. customers, and had undertaken verification procedures for existing customers.  $50 million of the $100 million penalty will be paid to the CFTC, with $30 million of the remainder paid immediately to FinCEN, and an additional $20 million to FinCEN suspended pending defendants’ undertaking of specific compliance procedures.  CFTC; FinCEN

August 4, 2021

For causing more than $100 million in losses to employers, employees, financial institutions, and financing companies and laundering more than $1 billion in stolen funds, Michael Mann, the owner of shuttered payroll service companies ValueWise and MyPayrollHR, has been sentenced to 12 years in prison.  In addition to misappropriating payroll funds and money laundering, Mann was also found to have fraudulently obtained tens of millions of dollars in loans from three financing companies, as well as fraudulently obtained lines of credit from several banks in the New York area.  NY AG; USAO NDNY

July 19, 2021

UBS Financial Services Inc. will pay $8 million to resolve claims of compliance failures with respect to the sale of an exchange-traded product designed to track short-term volatility expectations in the market as measured against derivatives of a volatility index. UBS placed restrictions on the sale of the product to brokerage customers, but did not place similar restrictions on activity by financial advisors, and failed to monitor concentration limits on volatility-linked ETPs. SEC

July 14, 2021

Following a lawsuit filed by the FTC in 2018, online lender LendingClub has agreed to pay $18 million to settle claims of deceiving consumers about hidden fees, misrepresenting consumers’ approvals for loans, and withdrawing money from consumer bank accounts without authorization.  In addition to the monetary penalty, LendingClub is now required to clearly and conspicuously disclose all fees, as well as the total amount of funds being borrowed.  FTC

July 13, 2021

A subsidiary of Teachers Insurance and Annuity Association of America (TIAA) has agreed to pay $97 million in restitution and make significant reforms to settle charges for making misleading statements and failing to disclose conflicts of interests to tens of thousands of customers.  Between 2012 and 2018, advisors with TIAA-CREF Individual & Institutional Services LLC (TC Services) pressured customers—many of them teachers and public sector employees—to move their investments from low-cost employer-sponsored retirement plans to higher-cost individually-managed accounts, which generated hundreds of millions of dollars in fees for TIAA.  NY AG; SEC

July 12, 2021

A non-bank institution in Georgia called GreenSky, LLC has been ordered to refund or cancel up to $9 million in fraudulent loans, pay a $2.5 million civil penalty, and implement new procedures to prevent future financial abuse.  According to the CFTC, GreenSky’s inappropriate and ineffective controls enabled third-party merchants to take out loans on behalf of thousands of consumers without their knowledge or authorization.  In addition to the financial resolution, GreenSky is now required to verify consumer identities and confirm authorizations before activating or disbursing loans, implement a consumer complaint management program, and properly oversee third-party merchant partners.  CFTC

July 9, 2021

Registered investment advisor Kestra Advisory Services, LLC will pay disgorgement and interest of $8.5 million and a civil penalty of $1.5 million to resolve SEC charges that it failed to disclose revenue sharing payments received by an affiliated broker-dealer when its clients invested in certain mutual funds.  SEC

June 30, 2021

Following its 2020 SEC penalty, Robinhood Financial LLC was ordered to pay $70 million by FINRA -- a $57 million penalty and $12.6 million in restitution and interest to harmed customers -- to resolve charges that the firm provided false and misleading information, improperly authorized customers for options trading without appropriate due diligence, and failed to reasonably supervise the technology it used to provide core broker-dealer services including for the acceptance and execution of customer orders.  FINRA