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Category Archives: Ponzi Schemes

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Who Wants To Know How OBA Disclosures Can Save Your Firm?

Posted in Broker-Dealer Registration, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Ponzi Schemes, SEC Compliance, SEC Enforcement

Over the years that I have defended broker-dealers and investment advisors, a more robust overview of outside business activity (OBA) disclosures would have gone a long way to disprove a number of claims. So where did these firms go wrong? The biggest issue that I have seen is a firm’s willingness to take the OBA… Continue Reading

Why elder issues are not just about your clients

Posted in Books and Records, Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, Cyber-Security, FINRA Compliance, Ponzi Schemes, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Fraud, Securities Litigation

The SEC and FINRA have made it very clear that they are focused on senior customers and elder abuse. Granted, firms must be focused on the elder customers, but, at the same time, must also focus on the fact that many advisors are included in the graying generation. What are firms to do about that?… Continue Reading

Is “Big Brother” Such A Bad Thing

Posted in Broker-Dealer Regulation, Corporate Governance, FINRA Compliance, FINRA CRD, FINRA Enforcement, Ponzi Schemes, Registered Representatives

FINRA recently announced a change to the supervision rule to require hiring firms to conduct background checks on new employees.  This rule change raises the question; what have member firms been doing all along.  In this day and age of instant information, having a new registered representative complete his/her U-4 should have only been a… Continue Reading

Broker Custody and Financial Responsibility Rules Implemented

Posted in Books and Records, Broker-Dealer Regulation, Ponzi Schemes, SEC Compliance

A divided Securities and Exchange Commission adopted new rules to strengthen oversight of broker-dealers’ custody of customer assets. The regulations amend the SEC’s broker-dealer reporting rule Securities and Exchange Act of 1934 Rule 17a-5, requiring firms to file new quarterly reports — Form Custody — containing information as to if and how they maintain custody… Continue Reading

What Does FINRA Rule 3270 Mean To You

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Money Laundering, Ponzi Schemes, Registered Representatives, Social Media

The outside business activities of registered persons have the potential for causing your firm significant liability, especially where those activities are unknown to the firm, involve firm customers and constitute a fraud.  FINRA 3270 only requires the registered person to provide notice to the firm before engaging in the activity, but should the firm do more.… Continue Reading

Law Firms Cannot Ignore Clients Who May Be Engaged in Ponzi Schemes

Posted in Federal and State Criminal Activities, Law Firms and Lawyers, Ponzi Schemes, SEC Enforcement

Regulators seem to believe that lawyers and their law firms act like ostriches when it comes to their clients and Ponzi schemes.  For example, a law firm paid $25 million to settle malpractice claims over legal services rendered to certain hedge funds and related entities controlled by a Ponzi Scheme artist, Arthur Nadel.  See SEC v.… Continue Reading

Receiver is Unlucky with Clawback Attempt From Charity

Posted in Ponzi Schemes, Securities Litigation

The receiver for a convicted fraudster and his entities will not be able to recover a $2 million donation the fraudster made to a small Minnesota college.  See Kelley v. College of St. Benedict, D. Minn., Civ.;’ No. 12-822 (RHK/LIB), 10/26/12, and http://docs.justia.com/cases/federal/district-courts/minnesota/mndce/0:2012cv00822/125281/34/. The federal district court found that the receiver lacked the ability to bring this action, and… Continue Reading

What You Should Know Before You Start a Ponzi Scheme?

Posted in Federal and State Criminal Activities, Ponzi Schemes

Okay, no one is suggesting that you start a Ponzi scheme!!!  However, now, that we have your attention, you should be aware of the United States Court of Appeals for the Second Circuit’s decision affirming a 25-year prison sentence for Ponzi scheme operator, Nicholas Cosmo.  See United States v. Cosmo, 2d Cir., No. 11-4506, 9/20/12, and http://federal-circuits.vlex.com/vid/united-states-v-cosmo-399026010. This… Continue Reading

Stanford Investors May Have a Second Life

Posted in Ponzi Schemes

The SEC has decided to appeal a district court decision denying the SEC’s application to force SIPC to pay Staford investors.  See SEC v. SIPC, D.D.C., No. 1:11-mc-00678-RLW, 8/31/12, and http://www.scribd.com/doc/81297680/Judge-Wilkins-Opinion-re-SEC-SIPC-Case. The SEC believes that these investors should be protected by SIPC insurance.  However, the court’s decision held that the investors did not invest through… Continue Reading

The Supremes Hand the SEC Big Win Against Hedge Fund Scammer

Posted in Ponzi Schemes, SEC Enforcement

The United States Supreme Court refused to review a federal appeals court ruling approving a $62 million award against a former hedge fund manager, who defrauded hedge fund investors over several years.  See Lauer v. SEC., U.S., No. 12-260, 10/29/12, and http://www.supremecourt.gov/orders/courtorders/102912zor_3f14.pdf. This was an appeal from the United States Court of Appeals for the Eleventh Circuit… Continue Reading