Friday, April 17, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Halts Investment Scheme Targeting Military Personnel
April 14, 2015 (Litigation Release No. 66)
The SEC has charged Leroy Brown Jr. and his firm, LB Stocks and Trades Advice LLC, with securities fraud and conducting an unregistered securities offering and ordered an asset freeze against Brown. Brown fabricated his stock broking experience to prospective clients telling them that he had many years of experience in securities and that he had all the necessary licenses and registrations. In reality, Brown is not a licensed securities professional and his firm is not registered with the SEC. A majority of Brown’s clientele are current and former military personnel as Brown is an Army veteran himself.

SEC Staff and FINRA Issue Report on National Senior Investor Initiative
April 15, 2015 (Litigation Release No. 67)
In light of the growing population of senior citizens (the Social Security Administration estimates that an average of 10,000 Americans will turn 65 every day for the next 15 years), the SEC and FINRA issued a report to help broker-dealers assess, craft, or refine their procedures for senior investors. At a time where conservative investments, that are traditionally suited for senior investors, are yielding historically low returns, Broker-dealers may be advising a variety of possibly unsuitable products and services to senior investors. This report examines the types of securities purchased for senior investors as well as broker-dealer training programs on investments for senior citizens.

SEC Charges New York-Based Financial Advisor with Stealing $20 Million from Customers
April 16, 2015 (Litigation Release No. 68)
The SEC announced fraud charges against Michael J. Oppenheim, a New York City-based financial advisor, for stealing at least $20 million from his clients. Oppenheim convinced some of his customers to withdraw millions out of their accounts in order to purchase municipal bonds in their name. However, Oppenheim deposited the funds into his personal brokerage accounts to engage in risky and sizable trading of stocks and options. Oppenheim lost the majority of his clients’ funds and used the rest for personal expenditures, including paying for his mortgage. Oppenheim hid his actions from his clients by creating false account statements and transferring money from other client accounts. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions barring future violations.

SEC Charges 10 Individuals in Scheme to Sell Stock in Blank Check Companies Secretly Bound for Reverse Mergers
April 16, 2015 (Litigation Release No.69)
The SEC alleges that Daniel McKelvey, Alvin Mirman, and Steven Sanders created undisclosed blank check companies, while falsely depicting in SEC filings that the companies were pursuing business ventures under figurehead officers that they installed. Blank check companies generally have no operations and no value other than their status as a registered entity. McKelvey, Mirman, and Sanders created nearly two dozen undisclosed blank check companies and sold them for about $6 million. The SEC also alleges that Edward Sanders, Scott Hughes, and Jeffrey Lamson assisted the scheme by posing as corporate nominees with knowledge of the false business plans, sometimes drafting the false business plans or recruiting other nominee officers. All six men are charged with violating or aiding and abetting violations of the antifraud, reporting, recordkeeping, and internal control provisions of the federal securities laws.

SEC Announces Agenda for May 13 Meeting of the Equity Market Structure Advisory Committee
April 17, 2015 (Litigation Release No. 70)
The SEC’s Equity Market Structure Advisory Committee will host its first meeting on May 13. The advisory committee was established this February to provide the SEC with a formal mechanism to receive advice on equity market structure issues. The first meeting will focus on “trade throughs” which are trades at prices inferior to displayed and immediately accessible quotations at other trade centers. The meeting is open to the public and will also be webcast live on SEC’s website.


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