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Regulatory Violations

This archive displays posts tagged as relevant to violations of rules and regulations government the financial markets and its participants. You may also be interested in the following pages:

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Sunshine State Local Elections Shine Light on How Dark Shell Company Data Can Be

Posted  11/18/20
By Sarah “Poppy” Alexander
top-secret-seal
Amidst the ongoing saga of the US national elections, Florida local elections may not have made much of a ripple.  But one small scandal in the Sunshine State reveals a lot about the ongoing problem the US has with shell corporations and their hidden ownership structures. The story is convoluted, as most shell company stories are.  A political donor, Proclivity, who had never donated money in Florida before,...

September 30, 2020

Morgan Stanley & Co. LLC will pay a total of $10 million in civil monetary penalties to the SEC and CFTC.  In an agreement with the SEC, the company will pay a $5 million civil monetary penalty arising from charges that the firm violated the short sale procedures of Regulation SHO. Specifically, Morgan Stanley improperly used “long” and “short” aggregation units when it hedged synthetic exposure to swaps by purchasing or selling the securities referenced in the swaps.  The aggregation units were not independent and did not have separate trading strategies.  As a result, Morgan Stanley should have netted the long and short positions of both units together or across the entire broker-dealer and marked the orders as long or short based on that netting. The CFTC, which also imposed a $5 million penalty, charged that Morgan Stanley failed to comply with swap data reporting obligations, inaccurately reporting swap data for approximately three million swaps. SEC; CFTC

September 28, 2020

Citibank N.A. and its related entities Citigroup Energy Inc. and Citigroup Global Markets, Inc. will pay a $4.5 million penalty for maintaining an inadequate telephone audio recording and preservation system.  According to the charges, Citibank internal reporting described the audio preservation system as having a flaw that was a “ticking time bomb” that could lead to the deletion of audio recordings.  When Citibank was required to produce recordings in response to a CFTC subpoena, the company disclosed that millions of audio files for 982 users had been deleted as a result of the flaw.  CFTC

September 15, 2020

Online gaming and gambling platform Unikm, Inc. agreed to pay a $6.1 million penalty to resolve allegations that the company unlawfully sold unregistered securities in its initial coin offering of “UnikoinGold” (UKG) tokens.  The recovered funds will be used to repay injured investors.  SEC

Catch of the Week: DOJ Charges North Korean and Malaysian Nationals for Bank Fraud, Money Laundering and Sanctions Violations

Posted  09/11/20
A list titled "SANCTIONS LIST"
The Department of Justice announced a criminal complaint charging Ri Jong Chol, Ri Yu Gyong, North Korean nationals, and Gan Chee Lim, a Malaysia national, for conspiracy to violate North Korean Sanctions Regulations, bank fraud, and conspiracy to launder funds.  The DOJ said defendants allegedly established and utilized front companies that transmitted U.S. dollar wires through the United States to purchase...

Catch of the Week: Interactive Brokers Pays $38 Million for Failures in Money-Laundering and Supervision

Posted  08/14/20
Computer screen with graphs
Brokerage firm Interactive Brokers LLC will pay $38 million in penalties to settle charges from multiple U.S. market regulators regarding its anti-money laundering practices, including alleged failures to file suspicious activity reports (SARs).  The discount broker has paid an $11.5 million penalty to settle charges with the Securities and Exchange Commission over the deficiencies in its internal controls that...

August 10, 2020

Greenwich, Connecticut-based brokerage firm Interactive Brokers LLC will pay fines and disgorgement totaling $23.7 million to the SEC and CFTC, as well as a $15 million penalty to the Financial Industry Regulatory Authority (FINRA), to resolve allegations related to the firm's anti-money laundering policies.  The SEC penalty of $11.5 million resolves charges that over the course of one year the brokerage failed to file more than 150 Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers.  The SEC order finds that defendant failed to recognize red flags concerning transactions, failed to properly investigate suspicious activity, and failed to file SARs even when suspicious transactions were flagged by compliance personnel. The $11.5 CFTC penalty, together with over $700,000 in restitution, resolves charges including that the firm, which is a registered futures commission merchant, failed to detect and report suspicious transactions, including in its handling of the accounts of Haena ParkSEC; CFTC

July 20, 2020

UBS Financial Services Inc. and two of its registered representatives will pay $10 million in penalties, disgorgement, and interest to resolve claims that UBS improperly redirected municipal bond offerings away from retail customers and to “flippers,” who re-sold the bonds to other broker-dealers, including UBS.  This practice allowed UBS to circumvent the priority retail order periods set by bond issuers and improperly obtain a greater allocation of bonds for its own inventory.  SEC

June 26, 2020

Telegram Group Inc. and its subsidiary TON Issuer Inc. will return more than $1.2 billion to investors and pay a $18.5 million civil penalty to resolve SEC charges that it conducted an unlawful unregistered offering of its digital tokens called “Grams.” The SEC alleged that the Grams were securities sold by defendants in order to raise capital to finance for their own business, which included the development of their own blockchain and a mobile messenger application.  SEC

May 15, 2020

Credit rating agency Morningstar will pay $3.5 million to settle charges that it violated conflict of interest rules by having credit rating analysts in its asset-backed securities group engage in marketing to issuers, including offering to provide indicative ratings.  SEC rules prohibit rating agencies from issuing or maintaining a credit rating where an analyst who participates in determining or monitoring credit ratings also participates in sales and marketing activity, and require agencies to have policies to address conflicts of interest.  SEC
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