Wednesday, April 11, 2018

Regulators Calling Your Clients? Maybe Yes, Maybe No.

Anyone who has been involved in an SEC or FINRA investigation into a sales practice issue has experienced the infuriating problem of the Staff calling the firm's customers as part of their investigation.

While they claim to have every right to do so, the mere existence of the call is a problem for the broker and the firm. Customers quite naturally begin to wonder what is wrong, why is the SEC or FINRA reviewing my account, and a host of other questions, none of which should be occurring. Making matters worse, the Staff will not tell you that they are calling customers, or who they called.

While it is undoubtedly true that the Staff has good intentions, and does not attempt to mislead the customer, many Staff members are inexperienced in the industry, and others are simply uninformed. I was recently involved in an investigation into the sales of syndicate offerings of closed end funds. Like all public offerings there is no commission added to the purchase price. If the shares are offered at $25, the customer pays $25.00, not $25.00 plus a commission. The broker is compensated by the issuer, by way of a sales credit. There is no direct cost to the customer.

Unfortunately, in this investigation, the examiner who was calling the customers, added up the sales credits, and called the customers, asking them "Are you aware that you paid your broker $10,000 in commissions?" Putting aside the obvious issue of an examiner prompting the customer in this manner, the statement is patently false. Given the fact that the customer has been told that there is no commission, and that the broker is paid by the issuer, the customer now believes that he has been lied to, and the broker-customer relationship starts to go down hill.

This is a serious issue and one what we have been dealing with for years, and we continue to fight this fight.

But now there is a new problem. The SEC has issued a press release disclosing that fraudsters are calling investors claiming to be SEC employees in an attempt to trick investors into sending money or revealing sensitive account information.

Actually, this should not be news to the SEC, as there were reports earlier this year of scammers using official looking letters and emails claiming to be from FINRA in order to steal money from investors. In February of this year, FINRA issued a press release on this exact issue - "FINRA Warns Investors of 'Regulator' Imposter Scams." In January of this year, two scammers were accused of calling investors posing as the SEC - U.S. Charges Two Over Fraud Featuring Bogus SEC Employees.

Investors, be careful out there. Scammers are using the SEC, FINRA, the IRS, the FCC and who knows what else to scam money. Be careful when speaking to someone who claims to be from a government agency. If you receive such a call, do not respond. If you are concerned, end the call and call the agency directly. They can confirm whether the call is legitimate.

Mark J. Astarita, Esq. is a securities attorney representing investors and financial professional nationwide in regulatory, litigation and compliance matters. If you have a question or concern regarding these issues, email Mark at

Tuesday, April 10, 2018

Longfin Accountants Resign

On Thursday, April 5, Longfin said it was notified that public accounting firm CohnReznick would no longer work with the company, effective immediately, according to an 8-K filing Monday with the SEC.
The accounting firm also told Longfin "that material weaknesses in internal control over financial reporting existed," the filing said.
The news comes one business day after the U.S. Securities and Exchange Commission said it has frozen $27 million in proceeds from insider stock sales.

Unusual Confidentiality Provision in Sexual Harassment Settlement

The NYT is reporting that there are six publicly known settlements involving former Fox News star Bill O’Reilly, five for sexual harassment and one for verbal abuse, that total about $45 million. According to the article the settlement agreements contain strict, and some might say, punitive, confidentiality provisions.

As everyone now knows, since the release of the Stormy Daniels agreement and the subsequent press and legal battles, settlement agreements often contain very strict confidentiality provisions,  including representations regarding the return of pictures and documents.

What is unusual is that, according to the article, one of the Bill O'Reilly agreements also contains a provision requiring the accuser to disclaim such materials “as counterfeit and forgeries” if they ever became public.

That is an interesting provision. While it might be the case that the material actually is counterfeit and a forgery, the next question is why is the counterfeiter being paid money? If the materials are in fact authentic, does the agreement require the accuser to lie?

Stormy Daniels claims that she was pressured to lie in connection with her settlement agreement. Is this the standard operating procedure for accused harassers and cheaters?

The article is at the NYT site -

Thursday, April 5, 2018

Recruiters Roundtable: All quiet on the Broker Protocol front? | On Wall Street

Recruiters Roundtable: All quiet on the Broker Protocol front? 

On Wall Street has released the first of three transcripts of a round table discussion with financial industry recruiters. The discussion is interesting, and provides an insight into the current recruiting trends from a recruiter's point of view.

The craziness of UBS and Morgan Stanley leaving the Protocol, the surge in independent firms and RIAs are discussed in this installment.

 On Wall Street recently beckoned its panel of industry recruiters to our offices in lower Manhattan for our annual gabfest to discuss trends in advisors’ career paths. When, where, why and how to move were the topics du jour.
We also discussed their views on the Broker Protocol, the #MeToo movement, advisor compensation and where the next generation of advisors will come from. We talked about which brokerage should be emulated (but isn’t) by others in the industry, and which of our participants no longer dreams of playing in the NBA. 

Sallah Astarita & Cox, LLC has decades of experience assisting financial advisors in their transitions between firms, and has negotiated agreements with every major firm, as well as dozens of others. Call 212-509-6544 to see if they can help you.

Wednesday, April 4, 2018

Ladenburg Partners with The W Source™ to Facilitate Further Growth of Female Financial Advisors’ Businesses | Business Wire

Alliance Between Ladenburg Institute of Women & Finance and The W Source™ Seeks to Strengthen Initiatives That Support Women in the Independent Financial Advice and Brokerage Industry
 Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS, LTS PrA)(“Ladenburg”), a publicly-traded, diversified financial services company, today announced that the Ladenburg Institute of Women & Finance (LIWF) has entered into a strategic partnership with The W Source™, a nationwide networking organization for female professionals. The partnership will aim to support female financial advisors’ businesses through business network referrals and help drive the advancement of women within the industry.
Founded in 2012, the Ladenburg Institute of Women & Finance has become a positive force for helping female advisors affiliated with Ladenburg’s independent advisory and brokerage firms Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services build and strengthen their businesses through innovative practice management and coaching programs, multigenerational business growth support and mentoring opportunities for younger women advisors as well as career changers through its LIFT Mentoring Program. LIWF also hosts an annual Symposium dedicated to developing and accelerating the success of female advisors.
Read the entire release.

Sallah Astarita & Cox, LLC represents financial professionals across the country in registration, compliance and arbitration matters. For more information call 212-509-6544

Tuesday, April 3, 2018

SEC News - Fraud, Asset Freeze, and a Barred Adviser

SEC Charges Company and Executives in Oil-and-Gas Offering Fraud
The SEC has charged a Dallas-based oil-and-gas company and two of its executives with defrauding investors out of at least $950,000 through a string of fraudulent oil-and-gas securities offerings.

SEC Obtains Partial Asset Freeze of Proceeds in Alleged Fraudulent Touting Scheme
The SEC has filed fraud charges in a scheme to inflate the share price of an Israeli medical marijuana company’s common stock. The court entered a partial asset freeze of the proceeds of the alleged fraud.

Investment Adviser Settles Charges for Cheating Clients in Fraudulent Cherry-Picking Scheme
Charges have been settled against an Austin, Texas-based investment adviser for defrauding his clients through a “cherry-picking” scheme. The adviser, who is the principal, sole owner, and sole employee of Valor Capital Asset Management LLC, has agreed to be banned from the securities industry and pay more than $715,000 to resolve the charges.

SEC Foils Penny Stock Executive’s Plan to Pump Stock and Exploit Investors
The SEC barred the president of a penny stock company from ever again serving as a public company officer or director after he was caught making false and misleading statements about the company to investors in an effort to increase demand for the stock.

The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email to

SEC Halts Fraudulent ICO

ICO Investment? SEC Halts Unregistered ICO

New investments bring new frauds, or sometimes just variations on a theme.. This true with cryptocurrency, demonstrated by the SEC's recent charges against two co-founders of a purported financial services start-up with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year. Criminal authorities separately charged and arrested both defendants.

The SEC's complaint alleges that Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech. Inc., masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a "CTR Token." Sharma and Farkas allegedly claimed that funds raised in the ICO would help build a suite of financial products.

They claimed, for example, to offer a debit card backed by Visa and MasterCard that would allow users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tender. In reality, the SEC alleges, Centra had no relationships with Visa or MasterCard. The SEC also alleges that to promote the ICO, Sharma and Farkas created fictional executives with impressive biographies, posted false or misleading marketing materials to Centra’s website, and paid celebrities to tout the ICO on social media.

According to the complaint, Farkas made flight reservations to leave the country, but was arrested before he was able to board his flight. Criminal authorities also arrested Sharma.

"We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses,” said Stephanie Avakian, Co-Director of the SEC's Division of Enforcement. “As the complaint alleges, these and other claims were simply false."

"As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme,” said Steve Peikin, Co-Director of the SEC's Division of Enforcement. “Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”

The SEC’s complaint, filed in federal court in the Southern District of New York, charges Sharma and Farkas with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Sharma and Farkas serving as public company officers or directors and from participating in any offering of digital or other securities. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Sharma and Farkas.

Securities Defense Lawyer Blog: SEC Halts Fraudulent Scheme Involving Unregistered Offering.


Contact Mark Astarita, New York Securities Lawyer, if you have any questions or concerns about your stock losses. 212-509-6544

Tuesday, March 27, 2018

SEC Proposes Targeted Changes to Public Liquidity Risk Management Disclosure

The SEC has proposed amendments to public liquidity-related disclosure requirements for certain open-end investment management companies.  Under the proposal, funds would discuss in their annual report the operation and effectiveness of their liquidity risk management program, replacing a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios on Form N-PORT on a quarterly basis. 

The Commission adopted the open-end fund liquidity rule in October 2016 in an effort to promote effective liquidity risk management programs in the fund industry.  Management of liquidity risk is important to funds’ ability to meet their statutory obligation — and their investors’ expectations — regarding redeemability of their shares.  Since adoption, staff has engaged in extensive outreach to identify potential issues associated with the effective implementation of the rule.

This outreach resulted in a series of actions taken by the Commission.  In addition to today’s proposal, the Commission previously adopted a rule that extends by six months the compliance date for the classification and classification-related elements of Rule 22e-4 and related reporting requirements.  In conjunction with this extension, the staff issued new guidance intended to assist funds in complying with the liquidity rule’s classification requirements.  Together with today’s proposal, these actions are aimed at providing investors with accessible and useful information about liquidity risk management of the funds they hold while providing sufficient time for funds to implement the requirement to classify their holdings in an efficient and effective manner.   

Corporate finance issues or questions? Call Mark Astarita at 212-509-6544 or visit The Securities Law Home Page

Thursday, March 15, 2018

SEC News - Gatekeeping Failures, $14 Million Penalty, and Illegal Brokering

Merrill Lynch Charged With Gatekeeping Failures in the Unregistered Sales of Securities
The SEC settled charges against Merrill Lynch, Pierce, Fenner & Smith Inc. for its failure to perform required gatekeeping functions in the unregistered sales of securities on behalf of a China-based issuer and its affiliates.

NYSE to Pay $14 Million Penalty for Multiple Violations
The SEC charged the New York Stock Exchange and two affiliated exchanges with regulatory failures in connection with multiple episodes, including several disruptive market events.

SEC Charges Unregistered Broker for Illegally Brokering Sales of EB-5 Securities
A New York-based company has been charged with illegally brokering dozens of investments by foreign nationals seeking U.S. residency.

SEC Charges U.K. Brokerage Firm, Investment Manager, CEO, and Others for Manipulative Trading in U.S. Microcap Stocks
A U.K.-based broker-dealer and its investment manager have been charged with securities fraud in connection with manipulative trading in the securities of HD View 360 Inc., a U.S.-based microcap issuer.


The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email to