Financial Enforcement Actions | Week of August 19 to 24

Financial Enforcement Action Summary

Weekly Enforcement Action Tracker

NYSE

1 Enforcement Document

$200,000.00 in Fines

Source: Credit Visionary

Penalties: $200,000.00
Respondent: Morgan Stanley & Co. LLC
Violation: Failing to establish, document, and maintain a system of risk management controls and supervisory procedures, including written supervisory procedures and an adequate system of follow-up and review, reasonably designed to manage the financial, regulatory, and other risks of its market access business… Read More

FINRA

16 Enforcement Documents

$1,408,555.56 in Fines

Penalties: $50,000.00
Respondent: Buttonwood Partners, Inc.
Violation: Buttonwood failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to review and monitor the transmittals of funds from customer accounts to third-party accounts. As a result, in March 2015, a Buttonwood customer’s funds were fraudulently transferred out of her account after her email was hacked. Based upon the foregoing, Buttonwood violated FINRA Rules 3110 and 2010. FACT… Read More

Penalties: N/A
Respondent: Andrew Jason Mandell
Violation: Mandell will not appear for on-the-record testimony in response to FINRA’s Rule 8210 request… Read More

Penalties: N/A
Respondent: Charla Kabana
Violation: On June 15, 2018, FINRA requested, pursuant to F1NRA Rule 8210, that Kabana provide documents and information relevant to FINRA’s investigation by no later than June 29, 2018. Kabana failed to provide the requested documents and information and therefore violated FINRA Rules 8210 and 2010. Kabana also refuses to appear for on-the-record testimony that FINRA has requested pursuant to FINRA Rule 8210. By refusing to appear for on-the-record testimony, Kabana violates FINRA Rules 8210 and 2010… Read More

Penalties: $5,000.00
Respondent: Joseph Eschleman
Violation: From early 2015 to December 2016, Eschleman exercised discretion in two customer accounts without first obtaining either written authority from his customers or Wells Fargo’s acceptance of the accounts as discretionary. As a result, Eschleman violated NASD Rule 2510(b) and FINRA Rule 2010… Read More

Penalties: $1,100,000.00
Respondent: Morgan Stanley & Co. LLC
Violation: Between November 30, 20112and July 2017, the Firm failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to prevent the entry of orders that exceed pre-set credit thresholds in the aggregate for each customer and the broker or dealer, in violation of SEA Rules 15c3- 5(c)(1)(i) and NASD Rule 3010 (for conduct occurring prior to December 1, 2014) and FINRA Rules 3110 (for conduct occurring on or after December 1, 2014) and 2010… Read More

Penalties: $48,000.00
Respondent: James Arthur Kujawski (“Kujawski”)
Violation: Between April 2012 and February 2014, while registered with UBS, Kujawski engaged in a private securities transaction by facilitating the repurchase of a call option between two old friends and business colleagues. In addition, between November 9, 2013, and September 14, 2014, Kujawski engaged in an outside business activity (purchasing and selling a restaurant) without notifying the Firm or seeking its approval as required… Read More

Penalties: $5,000.00
Respondent: Earle Clement Tingley
Violation: In and around June 2012, Tingley borrowed $35,000 from a customer without notifying WFA in violation of FINRA Rules 3240 and 2010… Read More

Penalties: N/A
Respondent: David A. Clark
Violation: Failing to appear and provide testimony in violation of FINRA Rules 8210 and 2010… Read More

Penalties: $5,000.00
Respondent: Raymond Menna
Violation: Between April 2016 and October 2017, Menna improperly shared in the losses of a customer in violation of FINRA Rules 2150(c)(1)(A) and 2010. Further, in October 2016 and December 2017, Menna provided inaccurate responses to the Plan member’s compliance questionnaires in violation of FINRA Rule 2010… Read More

Penalties: $70,555.56
Respondent: Akhil Morada
Violation: Between January 2014 and February 2015 (the “Relevant Period”), Morada engaged in quantitatively unsuitable trading in the accounts of three customers, in violation of FINRA Rules 2111 and 2010. In addition, at various times during the Relevant Period, Morada exercised discretion without prior written authorization in those three customers’ accounts, in violation of NASD Rule 2510(b) and FINRA Rule 2010… Read More

Penalties: $100,000.00
Respondent: World Equity Group, Inc.
Violation: From April 2013 through March 2017 (the “Relevant Period”), WEG failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that representatives’ recommendations of variable annuities complied with applicable securities laws and regulations, and FINRA Rules. As a result, the Firm violated F1NRA Rules 2330(c) and (d), NASD Rule 3010 (for conduct before December I, 2014), FINRA Rule 3110 (for conduct on and after December 1, 2014), and FINRA Rule 2010… Read More

Penalties: $5,000.00
Respondent: Jonathan William Iraggi
Violation: From October 2016 through June 2017, Iraggi exercised discretion in three customer accounts without obtaining written authorization from the customers or acceptance by the Firm, in violation of NASD Rule 2510(b) and FINRA Rule 2010… Read More

Penalties: $15,000.00
Respondent: Lisbeth Lovell Cherrington
Violation: During the period of July 2011 through August 2016, Cherrington provided a false date of birth to three member-firm employers on various internal documents relating to her employment applications, personal brokerage accounts records, and investments. By doing so, Cherrington caused her three member-firm employers to maintain inaccurate books and records, in violation of NASD Rule 3110(a) (for conduct occurring before December 5, 2011), FINRA Rule 4511 (for conduct occurring on or after December 5, 2011) and FINRA Rule 2010… Read More

Penalties: TBD
Respondent: Stewart Clinton Malloy
Violation: Respondent Stewart Clinton Malloy (Malloy”) failed to appear and provide testimony pursuant to FINRA Rule 8210 on two occasions. As a result, Malloy violated FINRA Rules 8210 and 2010… Read More

Penalties: N/A
Respondent: David JC Bolton
Violation: Bolton engaged in unsuitable trading, caused a member firm to maintain inaccurate books and records, and caused a member firm to fail to preserve books and records, in violation of FINRA Rules… Read More

Penalties: $5,000.00
Respondent: Joshua Robert Jones
Violation: During the period from March 10, 2017, through May 3, 2017 (the “Relevant Period”), Jones made three debits from his personal bank account at JPMorgan Chase Bank (“Chase Bank”), totaling $6,334.63, without sufficient funds to cover the debts. By doing so, Jones violated FINRA Rule 2010… Read More

SEC

50 Enforcement Documents

$24,570,619.40 in Fines

Penalties: $120,297.85
Respondent: SEC Complaint – Shapiro – Medient Studios, Inc. et al.
Violation: Defendant is permanently restrained and enjoined from violating Section 5 of the Securities Act of 1933 by, directly or indirectly, in the absence of any applicable exemption… Read More

Source: Fortune

Penalties: $8,872,724.81
Respondent: Merrill Lynch, Pierce, and Fenner & Smith Incorporated
Violation: Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill”), a registered investment adviser, failed to disclose that the portfolio manager evaluation process employed in connection with a January 2013 termination recommendation for over fifteen hundred of its retail advisory accounts was exposed to a conflict of interest involving other business interests… Read More

Penalties: TBD
Respondent: SEC Complaint – Medient; – Medient Studios, Inc. et al.
Violation: Defendant failed to answer the complaint, default was entered against it on April 3, 2018. (Doc. 49.) Plaintiff filed its Motion for Default Judgment on April 4, 2018, requesting the entry of a default judgment against Defendant pursuant to Rule 55 of the Federal Rules of Civil Procedure… Read More

Penalties: $1,824,368.00
Respondent: Medient Studios, Inc. et al.
Violation: Shapiro, along with Medient’s founder and former chairman, Manu Kumaran, schemed to make an assortment of false and misleading statements in Medient’s press releases and corporate filings, and that Shapiro, Kumaran, and others backdated and falsified promissory notes as part of a scheme to issue Medient’s and Fonu2’s common stock in exchange for financing… Read More

Penalties: TBD
Respondent: Equitybuild, Inc. et al.
Violation: Operating a $135 million offering fraud involving real estate located primarily on Chicago’s South Side… Read More

Penalties: $150,500.00
Respondent: Joseph Jennings, CPA
Violation: On March 23, 2015, while in possession of nonpublic information, and in breach of his duty of trust and confidence to the Firm, Jennings purchased 100 Kraft call options (with a strike price of $67.50 and an expiration date of June 19, 2015) in a close relative’s online brokerage account for approximately $5,500… Read More

Penalties: TBD
Respondent: SEC Complaint – Equitybuild, Inc. et al.
Violation: Defendants raised these funds by falsely promising investors safe investments, secured by an income-producing real estate, that generated returns of 12% to 20%. Most of the real estate promoted to investors were residential properties in underdeveloped areas on the South Side of Chicago… Read More

Penalties: $3,809.33
Respondent: David Lubin
Violation: David Lubin, a lawyer licensed in New York, fraudulently misrepresented and concealed material information regarding the ownership of shares of a publicly-traded company… Read More

Penalties: TBD
Respondent: SEC Complaint – A. Catlin Cade, IV
Violation: On July 18, 2016, A. Catlin Cade, IV (“Cade’ or “Defendant”), traded on the basis of material nonpublic information concerning Golden Enterprises, Inc. (“Golden Enterprises”), formerly a NASDAQ-listed potato chip manufacturer based in Birmingham, Alabama… Read More

Penalties: $185,642.13
Respondent: Biltmore Wealth Management, LLC, and Caleb R. Overton
Violation: From at least June 2014 through August 2015, Biltmore and Overton raised about $2.2 million from ten investors, eight of whom were pre-existing clients of Biltmore, to invest in Biltmore Capital, L.P. (the “Fund”), a private fund they managed… Read More

Penalties: TBD
Respondent: SEC Complaint – Intertech Solutions, Inc., William Scott Marshall, David Michael Naylor, and West Port Energy LLC
Violation: Between February 2014 and December 2016, Defendants Intertech Solutions, Inc. (“ITEC”), William S. Marshall, and David M. Naylor raised over $7 million from hundreds of investors throughout the United States and Canada through fraudulent, unregistered offerings of common stock and investment contracts… Read More

Penalties: TBD
Respondent: Eric P. Lesak, Global Research, LLC (PA), Global Research, LLC (NY)
Violation: Between December 2015 and June 2017, the defendants pitched Axiom stock to more than 100 investors who purchased more than 1.9 million shares of stock for approximately $2.8 million, leading to losses of more than $2.3 million… Read More

Penalties: TBD
Respondent: Harpreet Grewal
Violation: Hid the company’s slowing customer growth from investors and inflated its publicly reported subscriber numbers… Read More

Penalties: $7,677,150.00
Respondent: Intertech Solutions, Inc., William Scott Marshall, David Michael Naylor, and West Port Energy LLC
Violation: Marshall and Naylor misled investors about the value of Intertech’s gold mine interest, Intertech’s timeframe for generating revenue, and commission payments Intertech made to securities solicitors… Read More

Penalties: TBD
Respondent: SEC Complaint – Eric P. Lesak, Global Research, LLC (PA), Global Research, LLC (NY)
Violation: Between December 2015 and June 2017, Eric P. Lesak – a twice-convicted securities fraudster – acted through Global Research, LLC (PA) and Global Research, LLC (NY) (collectively, “Global”) and on his own to defraud investors into purchasing the common stock of a penny-stock company called Axiom Holdings, Inc. (“Axiom”)… Read More

Penalties: $1,387,625.67
Respondent: Hari K. Ravichandran
Violation: Endurance made material misrepresentations and omissions about the company’s subscriber metrics… Read More

Penalties: TBD
Respondent: SEC Complaint – Harpreet Grewal
Violation: Grewal defrauded Constant Contact’s investors concerning the number of paying customers for the company’s products and services, which was a key metric disclosed by Constant Contact to its investors… Read More

Penalties: $58,299.27
Respondent: Ismail Lila
Violation: In June 2017, Respondent obtained material nonpublic information concerning the Transaction from his then-employer, Teekay… Read More

Penalties: TBD
Respondent: A. Catlin Cade, IV
Violation: Misappropriated material nonpublic information concerning the merger of potato manufacturer Golden Enterprises Inc. with privately-held Utz Quality Foods, LLC… Read More

Penalties: $34,352.22
Respondent: Waruna Tivanka Ellawala
Violation: Ellawala received information concerning Endurance’s efforts to quantify and address its subscriber error. While in possession of information regarding the subscriber error, Ellawala reported Endurance’s overstated subscriber metrics to the investing public in quarterly earnings calls… Read More

Penalties: TBD
Respondent: James P. Scherr
Violation: From at least 2009 to 2016, Scherr directed the purchase of new issue municipal bonds in primary offerings from underwriters, which were then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: N/A
Respondent: James J. O’Neil
Violation: From at least 2009 to 2016, O’Neil purchased new issue municipal bonds in primary offerings from underwriters, which he then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: N/A
Respondent: Train and Babcock Advisors LLC
Violation: Miller Kaplan, pursuant to and in accordance with the Omnibus Order, is appointed the Tax Administrator for the QSF in the above-referenced proceeding… Read More

Penalties: N/A
Respondent: American Standard Energy Corp., Elm Valley Acquisition Corporation and LVFAR Green Technology Corp.
Violation: All of the Respondents are delinquent in their periodic filings with the Commission, have repeatedly failed to meet their obligations to file timely periodic reports, and failed to heed delinquency letters sent to them by the Division of Corporation Finance requesting compliance with their periodic filing obligations or, through their failure to maintain a valid address on file with the Commission as required by Commission rules, did not receive such letters… Read More

Penalties: TBD
Respondent: Fred Alger Management, Inc. and Fred Alger & Company, Incorporated
Violation: On September 25, 2017, the Commission issued an order directing the transfer of $18,340,472.97 from the Fair Fund to The Huntington National Bank for the first distribution in accordance with the Distribution Plan… Read More

Penalties: N/A
Respondent: Jeffrey Scott Davis
Violation: Executing a scheme and artifice to defraud clients by means of materially false and fraudulent pretenses, representations and promises, from about May 2012 through June 2013, knowingly obtained monies for himself by embezzling, stealing and converting to his own use monies in brokerage accounts belonging to clients whom he serviced, a total of $190,590.50, more or less, to be transmitted by means of wire communication in interstate and foreign commerce, all in violation of 18 U.S.C. § 1343… Read More

Penalties: N/A
Respondent: Core Performance Management, LLC
Violation: From at least 2009 to 2016, CPM purchased new issue municipal bonds in primary offerings from underwriters, which were then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: N/A
Respondent: Sharlene F. Mesite
Violation: From at least 2009 to 2016, Mesite purchased new issue municipal bonds in primary offerings from underwriters, which she then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: N/A
Respondent: Anadel R. Pinzon
Violation: From at least 2010 to 2014, Pinzon purchased new issue municipal bonds in primary offerings from underwriters, which she then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: $1,100,000.00
Respondent: Barry M. Kornfeld, et al., Lynette M. Robbins and Knowles Systems, Inc.
Violation: Defendants reaped millions of dollars in commissions on their sales of Woodbridge securities even though they were not registered as brokerdealers and were not permitted to sell securities. Barry Kornfeld also violated a prior SEC order which barred him from acting as a broker… Read More

Penalties: N/A
Respondent: Deborah B. Dora
Violation: From at least 2009 to 2016, Dora purchased new issue municipal bonds in primary offerings from underwriters, which she then immediately sold, or “flipped” to broker-dealer customers for a profit… Read More

Penalties: $150,000.00
Respondent: Aria Partners GP, LLC
Violation: Respondent failed to implement a compliance program consistent with its obligations as a registered investment adviser… Read More

Penalties: $18,838.00
Respondent: James T. Lentz
Violation: Lentz used material, nonpublic information, obtained through his employment, to trade ahead of StoneMor’s October 27, 2016 announcement that lagging sales performance would necessitate a 50% reduction in its quarterly distribution payment to unitholders (the “Announcement”)… Read More

Penalties: TBD
Respondent: Fishoff, et al.
Violation: Participating in a scheme that generated $1.5 million of illegal profits on insider trading ahead of the announcement of a licensing agreement between Sangamo and Biogen Idec Inc., another large pharmaceutical company… Read More

Penalties: $202,767.12
Respondent: First Western Advisors
Violation: From at least March 20, 2012, to December 31, 2016 (the “Relevant Period”), FWA disclosed to its advisory clients that it did not receive compensation in any form from the sale of mutual funds when, in fact, FWA, in its capacity as a broker-dealer, did… Read More

Penalties: $2,784,245.00
Respondent: Gary S. Williky
Violation: Perpetuating an illegal market manipulation and insider trading scheme that involved Indiana-based company Imperial Petroleum, Inc., which purported to be in the renewable fuel production business… Read More

Penalties: TBD
Respondent: SEC Complaint – Fishoff, et al.
Violation: In December 2013 and January 2014, Fishoff used material non-public information obtained from a corporate executive at a large, publicly-traded pharmaceutical company, Sangamo BioSciences Inc. (“Sangamo”), to trade Sangamo securities and to tip others who traded Sangamo securities… Read More

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