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Financial Institution Fraud

This archive displays posts tagged as relevant to fraud by or involving financial institutions. You may also be interested in the following pages:

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June 30, 2021

Investment advisor Securities America, Inc. will pay a $1.75 million civil penalty to resolve charges that it failed to implement policies and procedures that were reasonably designed to protect client assets from misappropriation.  While affiliated entities to whom SAA had delegated responsibility for surveillance of advisory accounts had received automated alerts about potentially suspicious withdrawals from client accounts, those alerts were ignored and approximately $8 million was misappropriated from SAA advisory accounts.  SEC

June 29, 2021

Neovest Inc., a JPMorgan Chase & Co. subsidiary that provides an order and execution management system (OEMS) that facilitates electronic trading, will pay $2.75 million for its failure to register as a broker-dealer. Neovest's OEMS allows customers to route orders for stocks and options to more than 360 customer-selected destination brokers who entered into agreements with Neovest for execution. In exchange for its OEMS services, Neovest received transaction-based compensation, which were sent to J.P. Morgan Securities LLC, a registered broker-dealer, and then transferred to Neovest. SEC

June 25, 2021

Three Credit Suisse entities—Credit Suisse International, Credit Suisse Securities Europe Limited, and Credit Suisse Capital LLC—have been ordered to pay a $1.5 million civil monetary penalty to resolve charges of failing to comply with swap data reporting obligations between 2013 and 2018.  Specifically, the entities reported the mark-to market notational value of underlying equity rather than the daily mark of certain equity swap transactions.  The failure resulted in errors in the majority of the reportable equity swap transactions submitted to the swap dealer repository.  CFTC

Catch of the Week: SEC Cracks Down Again on Cybersecurity Disclosures

Posted  06/17/21
hacker in hoodie typing code in program using laptop in dark studio
This week’s Catch of the Week goes to the Securities and Exchange Commission for its latest settlement involving cybersecurity risks.  The SEC charged First American Financial Corporation, an insurance company listed on the New York Stock Exchange, with failing to adequately control for cybersecurity risks.  According to the SEC’s Order, a journalist alerted First American that it had a major vulnerability in...

May 17, 2021

Index provider S&P Dow Jones Indices LLC, which publishes the S&P 500 VIX Short Term Futures Index ER, will pay a $9 million penalty to resolve claims that inadequate quality control procedures, including an undisclosed “auto-hold” feature triggered by a VIX spike, caused it publish and disseminate stale index values during a period of unprecedented volatility.  As a result of the stale information, issuers who used the index to offer securities reported incorrect values.  SEC

May 13, 2021

Financial services company State Street Corporation will pay a $115 million criminal penalty and enter into a deferred prosecution agreement following its voluntary disclosure to authorities that, over the course of 17 years, the bank defrauded its clients out of $290 million.  State Street  admitted that it secretly marked up “out-of-pocket” (OOP) expenses charged to clients, despite telling clients that OOP expenses were passed through without markups. State Street executives took steps to conceal the mark-ups from clients, including by misleading clients when they inquired about what they were being charged for OOP expenses. As part of the settlement, defendant agreed to cooperate with ongoing investigations, to enhance its compliance program, and to retain an independent corporate compliance monitor for a period of two years. DOJ

ITG – Securities violations (30% SEC whistleblower award)

Constantine Cannon’s team secured another multi-million-dollar SEC whistleblower award for an anonymous whistleblower whose original information and assistance led to an enforcement action against brokerage firm ITG.  The SEC has repeatedly fined ITG in recent years, including for violations related to the firm’s dark pool, POSIT.  A dark pool is an alternate trading system that is supposed to allow investors to place buy and sell orders without alerting predatory traders who can manipulate prices.  ITG told its customers that they could trade in POSIT anonymously and confidentially, but the SEC twice concluded this was false.  The SEC awarded our client 30 percent of the recovery, the maximum amount allowed under the SEC Whistleblower Program.  For more information, see Constantine Cannon Client Receives Maximum Award for Blowing the Whistle on ITG

May 12, 2021

Registered broker-dealer GWFS Equities Inc. will pay a penalty of $1.5 million to settle allegations that it failed to respond appropriately when it detected external bad actors gaining, or attempting to gain, access to the retirement accounts of participants in the employer-sponsored retirement plans it serviced, including through the use of improperly obtained electronic login information, user names, email addresses, and passwords. There was no allegation that this personal identifying information was disclosed in a breach of GWFS systems. However, the bad actors used this information to request distributions from plan participant accounts. While GWFS detected and blocked many of these attempts, the SEC charged that GWFS failed to file suspicious activity reports, or filed incomplete SARs, with respect to the account takeovers. SEC

COVID Frauds of the Week: DOJ Continues to Crack Down on PPP Fraudsters

Posted  03/19/21
ponzi scheme vs pyramid scheme
As of this week, the Small Business Administration has disbursed over $700 billion in Paycheck Protection Program (PPP) loans to small businesses and non-profits. There are over $100 billion in remaining appropriations, with additional appropriations likely to follow thereafter. With numbers like these, the program has become a magnet for fraudsters seeking to profit from the pandemic. The DOJ has been actively going...
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