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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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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

December 26, 2018

JPMorgan Chase Bank N.A. has agreed to pay more than $135 million to settle charges that it improperly handled “pre-released” American Depositary Receipts (ADRs).  ADRs are securities that represent shares in a foreign company, and ordinarily require that a corresponding number of foreign shares be held at a depository bank. However, “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided that brokers have an agreement with a depository bank and the broker or its customer owns the required number of foreign shares. The SEC found that JPMorgan improperly provided ADRs to brokers when, in fact, neither the broker nor its customer had the foreign shares needed to support those new ADRs, a practice which can result in inappropriate short selling and dividend arbitrage. SEC

December 21, 2018

Lon Olen Friedrichsen of Alton, Iowa, has been ordered to pay $2.1 million following a CFTC complaint alleging that he improperly solicited customers to obtain access to their futures trading accounts by misrepresenting his registration and experience.  Friedrichsen then ran up substantial losses in the customer accounts, but created false statements to conceal those losses.  CFTC

December 21, 2018

Advisory firms American Portfolios Advisers Inc. and PPS Advisors Inc., together with PPS's CEO/CIO, Lawrence Nicholas Passaretti, will pay more than $1.8 million to settle SEC charges that they improperly recommended mutual fund share classes that paid 12b-1 fees to the firms' representatives.  In addition, the companies misrepresented to customers that their advisors did not receive 12b-1 fees and/or only selected more expensive share classes when less expensive classes were not available.  SEC

December 21, 2018

Newport Private Capital LLC and its principal, Jonathan Hansen, have been ordered to pay a $315,000 penalty for a "cherry-picking" scheme by which NPC entered multiple orders for commodity interests, but only allocated the orders to specific customer accounts after they were executed.  The defendants then preferentially allocated the transactions that turned out to be profitable to accounts in the name of Hansen's spouse, and not to the accounts of other NPC customers.  CFTC

December 19, 2018

Following charges brought by the CFTC in 2016, Haena Park and companies affiliated with her, Phaetra Capital GP LLC, Phaetra Capital Management LP, and Argenta Group LLC, have been ordered to pay $23 million in restitution to defrauded investors in commodity pools operated by defendants.  Park made material misrepresentations and omissions concerning her trading expertise, and the defendants made and issued false documents to conceal their trading losses and misappropriations of investor funds, in addition to commingling funds and failing to operate the commodity pool as a separate legal entity.  CFTC
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