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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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November 29, 2018

Professional boxer Floyd Mayweather Jr. and music producer DJ Khaled have settled SEC charges that they promoted initial coin offerings (ICOs) by Centra Tech Inc. without making required disclosures about payments they received from Centra Tech.  Mayweather agreed to pay disgorgement, penalties, and interest totaling $614,775, and Khaled agreed to pay a total of $152,725. SEC

November 16, 2018

CarrierEQ Inc. (Airfox) and Paragon Coin Inc. have agreed to pay civil penalties of $250,000 each to resolve charges that they conducted initial coin offerings (ICOs) in 2017 without registering the ICOs pursuant to federal securities laws.  Airfox's offering had raised $15 million and Paragon had raised $12 million.  The companies also agreed to provide compensation to harmed investors and to register their tokens as securities.  SEC

November 7, 2018

Citibank N.A. has agreed to pay $38.7 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 Citibank improperly provided ADRs to brokers when, in fact, neither the broker nor its customer had the foreign shares needed to support those new ADRs.  SEC

November 8, 2018

Zachary Coburn, the founder of EtherDelta, a digital "token" trading platform, settled SEC charges that the platform operated as an unregistered exchange.  Over an 18-month period, EtherDelta's users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws.  Because it was functioning as an online national securities exchange, EtherDelta was required to register with the SEC or qualify for an exemption.  Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.  SEC

November 8, 2018

Commerzbank AG agreed to pay a $12 million civil fine and adopt compliance procedures to settle CFTC charges that it failed to supervise its Swap Dealer's activities and made misleading statements and material omissions to the CFTC concerning its Swap Dealer’s operations and compliance with the CEA and CFTC Regulations.  The CFTC found that Commerzbank failed to adopt any effective process for determining whether swap transactions with certain non-U.S. swap counterparties were subject to Dodd-Frank, failed to report swap transactions to swap data repositories, failed to submit Large Trader Reports, and and failed to execute certain swaps on swap execution facilities, all in violation of application rules and regulations.  CFTC

November 7, 2018

ITG Inc. and its affiliate AlterNet Securities Inc. have agreed to pay a $12 million SEC fine to settle charges that ITG made misstatements about the operation of its dark pool, POSIT, and failed to establish adequate safeguards and procedures to protect POSIT subscribers’ confidential trading information.  The SEC found that ITG improperly disclosed the confidential dark pool trading information of firm clients, and failed to disclose certain structural features of the dark pool, including segmentation and speed limits.  SEC

October 5, 2018

Ameriprise Financial Services agreed to pay $375,000 to New Jersey to resolve an investigation that Ameriprise sold unsuitable non-traded real estate investment trusts (REITs) and non-traded business development companies (BDCs) to customers, did not reasonably supervise the sale of these alternative investments, and did not keep required books and records.  Most of the alternative investment offerings sold by Ameriprise during the relevant time period were registered with the New Jersey Bureau of Securities as conditioned upon heightened suitability standards for sales to New Jersey residents, but Ameriprise had failed to meet the New Jersey Prospectus Suitability Standards.  NJ

October 3, 2018

The SEC froze the assets of U.K. citizen Roger Knox and the Swiss-based company Wintercap SA based on their role in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.  The parties are alleged to have helped securities holders conceal their stock ownership and to have provided anonymous access to brokerage accounts to sell the shares in the U.S. market. Knox allegedly helped facilitate pump-and-dump and other market manipulation schemes by selling massive quantities of microcap securities on behalf of the concealed shareholders, and simultaneously orchestrating promotional campaigns and other efforts to artificially inflate the price and trading volume of those shares.  DOJ announced parallel civil and criminal proceedings.  SEC; DOJ

August 20, 2018

Merrill Lynch, Pierce, Fenner & Smith has agreed to pay $8.9 million to resolve claims that it violated the anti-fraud provisions of the Investment Advisers Act by failing to disclose its conflicts of interests to clients. According to the SEC, the violation occurred when Merrill Lynch failed to go through with a planned vote on whether to stop offering certain products managed by a third party, and then failed to disclose to clients that this decision was due to its own business interests. SEC

July 30, 2018

The CFTC ordered Chicago-based R.J. O’Brien & Associates (“RJO”) to pay a $600,000 civil penalty in connection with the company’s failure to detect its client’s post-execution trade allocation scheme. As a registrant, RJO had a duty to monitor the relevant transactions for suspicious activity, but failed to adequately do so, according to the Commission. As a result, the scheme went undetected, and the client was able to allocate profitable trades to specific accounts, sending less profitable trades to the customer or Pool accounts. CFTC
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