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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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August 16, 2019

Brokers Cantor Fitzgerald & Co. and BMO Capital Markets Corporation will pay, respectively, $647,000 and $3.9 million to resolve allegations that they marketed pre-released American Depositary Receipts (ADRs) when they should have known that the transactions were not backed by foreign shares.  SEC

July 12, 2019

Korea Exchange, Inc., based in Busan, Korea, will pay $150,000 and implement financial management standards in settlement of charges by the CFTC that the company falsely certified to the Commission that it was in compliance with specified international financial management standards and testing requirements.  KRX had made the certification in order to maintain its exemption from certain registration requirements.  CFTC

June 18, 2019

Wedbush Securities, Inc., will pay more than $8.1 million to the SEC to resolve charges that the securities company improperly obtained pre-released ADRs from depositary banks when it should have known that neither the firm nor its customers owned the foreign shares needed to support those ADRs.  This practice inflates the total number of a foreign issuer’s tradeable securities.  The SEC further alleged that Wedbush failed to have adequate compliance and training.  The consent order requires the company to pay more than $4.8 million in disgorgement, approximately $800,000 in prejudgment interest, and a civil money penalty of more than $2.4 million.  SEC

June 6, 2019

The SEC has filed a federal court action against Kik Interactive, Inc. The company, which previously offered an online messaging application, raised more than $100 million through the sale of "Kin" tokens, an unregistered digital asset.  Kik marketed the Kin cryptocurrency as an investment which would trade on secondary markets, and which Kik would incorporate in its messaging platform, creating a Kin transaction network both on and off the messaging platform.  According to the SEC's complaint, these Kik platforms did not, in fact, exist.  Kik did not comply with securities registration requirements in offering the Kin tokens for sale, and the SEC alleges that in failing to do so, Kik violated Section 5 of the Securities Act of 1933.  SEC

April 29, 2019

In an enforcement action initiated by the CFTC, Michael Shah and Zilmil, Inc., both of Jacksonville, Florida, have been ordered to pay nearly $23 million for their roles as "affiliate marketers" for unregistered binary options trading schemes, targeting consumers with false and misleading advertising for the trading systems.  CFTC

March 11, 2019

Marshall Islands-based 1pool Ltd. and its chief executive officer and owner, Patrick Brunner, will pay $990,000 to resolve a CFTC action alleging that they illegally offered retail commodity transactions that were margined in bitcoin, failed to register as a futures commission merchant (FCM), and failed to have required anti-money laundering procedures in place. The settlement payment consists of a $175,000 civil monetary penalty, disgorgement of $246,000 in gains, and restitution of approximately $570,000 to U.S. customers.  CFTC

March 11, 2019

Investment advisers that placed their clients in higher-cost mutual fund share classes, and received a share of the higher 12b-1 fees charged by those investments, but failed to adequately disclose the conflicts of interest where a lower-cost share class was available, will collectively return more than $125 million to their clients, the majority of whom are retail investors.  Seventy-nine investment advisors have agreed to refund the improperly disclosed fees collected by them to individual clients, with interest, as well as to undertake additional compliance procedures.  SEC

February 15, 2019

Following his conviction at trial for securities fraud and related charges, attorney James M. Schneider of Boca Raton, Florida, was sentenced to seven years in prison and ordered to pay restitution of $19.7 million to over 2,000 investors.  From 2008 to 2013, Schneider and his co-conspirators created approximately 20 shell companies, falsely representing their ownership and control in SEC filings before offering their securities for sale.  The conspirators would then use the shell company shares in pump-and-dump and other manipulation schemes.  USAO SD FL

January 29, 2019

Four public companies – Grupo Simec S.A.B de C.V., Lifeway Foods Inc., Digital Turbine Inc., and CytoDyn Inc. – have agreed to cease and desist orders, findings of violations, and civil penalties with respect to their failures to maintain internal control over financial reporting (ICFR).  Although each of the companies had disclosed material weaknesses in ICFR, the SEC found that they had failed to adequately remediate the weaknesses.  SEC
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