Oppenheimer Adviser Pleads to Insider Trading Charges

With insider trading law up in the air after the Second Circuit decision in US v. Newman and the conflicting decision from the First Circuit in US vs. McPhail, there has been a apparent lull in insider trading cases.

That lull may be over. Although the Supreme Court has no yet ruled on the conflict between the Circuits, prosecutors are pushing forward.

Last week a former investment adviser at Oppenheimer pled guilty to charges that he engaged in an insider trading scheme based on information supplied by a childhood friend working at Pfizer Inc.

The charges relate to conduct that began while he was at RBC Capital Markets and then continued at Oppenheimer & Co Inc. According to press reports, the broker admitted that he executed trades based on inside information supplied by a friend at Pfizer who pleaded guilty in May as part of a deal to cooperate with prosecutors.

Under a plea agreement, the broker agreed to forfeit almost $386,000 and not appeal any prison sentence of 2-1/2 years or less.

Ex-Oppenheimer adviser pleads guilty to U.S. insider trading charges:

Feds Ban PDAAs at Federally Funded Nursing Home Facilities

From the Securities Arbitration Commentator:

 "The Centers for Medicare and Medicaid Services has issued final regulations banning nursing homes and long-term care facilities receiving federal funds from using mandatory predispute arbitration agreements."

Feds Ban PDAAs at Federally Funded Nursing Home Facilities:

FINRA Close to Filing Fraud Rule for ‘Vulnerable’ Investors

FINRA plans to file its proposed Rule 4512 to help block elderly and "vulnerable" investors from financial exploitation, FINRA states that the rule change is not simply about protecting “senior” investors but all investors that fall into the “vulnerable” category—those with diminished capacity, disabilities, and even those in the military.

The FINRA plan would require member firms to “make reasonable efforts” to obtain the name of and contact information for a trusted contact person for a customer’s account by amending Rule 4512 (Customer Account Information).

The rule would also allow advisers/brokers to place a temporary hold on transactions that could be fraudulent by creating a new FINRA Rule 2160 (Financial Exploitation of Eligible Adults), and applies to investors aged 65 or older as well as investors 18 and older who have a mental or physical impairment that renders them unable to protect their own interests.

FINRA Close to Filing Fraud Rule for ‘Vulnerable’ Investors: "

Board Member Buys Stock, Pleads Guilty to Insider Trading

Let us imagine that you are on the Board of Directors of a large corporation, and at a board meeting you learn that the corporation is going to purchase a smaller competitor, which is a public company. Your corporation's intent to do so has not be publicly announced, and you realize this is the perfect opportunity to make some money. So, the next morning you call your stock broker and buy 10,000 shares of the target company's stock.

And, after the announcement you sell that stock for a $56,000 profit. Pretty smart investing, right?

Well, readers of our blog know better. This is the classic case of insider trading, and the board member pled guilty to criminal charges of insider trading, agreed to pay back his profits of $56,000 plus a penalty of $55,000, and was sentenced to 24 months of probation, 9 months of which are to be served by home confinement. The press reports that he also lost his position on the Board of Directors, and then there is the public shaming by virtue of multiple press reports about the charge and plea.

Original story at Yahoo! Finance

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Sallah Astarita & Cox is a securities law firm which represents investors and brokers across the country in SEC and FINRA proceedings and white collar criminal actions. If you need a securities attorney for an insider trading case, or any securities related matter, call their office at 212-509-6544 or visit their web site


Also see, New York Securities Lawyer web site.

What’s So Wrong With Insider Trading Anyway? | FiveThirtyEight

Interesting analysis of the current state of insider trading law, and the pending Supreme Court case.



What’s So Wrong With Insider Trading Anyway? | FiveThirtyEight

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Credit Suisse Paying $90 Million Penalty for Misrepresenting Performance Metric

The Securities and Exchange Commission today announced that Credit Suisse AG has agreed to pay a $90 million penalty and admit wrongdoing to settle charges that it misrepresented how it determined a key performance metric of its wealth management business.

 

A former executive agreed to settle charges that he was a cause of Credit Suisse’s violations.

 

An SEC investigation found that Credit Suisse veered from its publicly disclosed methodology for determining net new assets (NNA), a metric valued by investors in financial institutions to measure success in attracting new business.  Disclosures stated that Credit Suisse was individually assessing assets based on each client’s intentions and objectives.  But Credit Suisse at times instead took an undisclosed results-driven approach to determining NNA in order to meet certain targets established by senior management.

 

According to the SEC’s orders, Rolf Bögli, who served as chief operating officer of the firm’s private banking division, pressured employees to classify certain high net worth and ultra-high net worth client assets as NNA despite concerns raised by employees most knowledgeable about a particular client’s intent. 

 

“Credit Suisse conveyed to the investing community that it followed a structured process for recognizing net new assets when, in fact, the process was reverse-engineered to meet targets,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division.  “Credit Suisse’s failure to disclose this results-driven approach deprived investors of the opportunity to fairly judge the firm’s success in attracting new money.”

 

The SEC’s orders find that Credit Suisse violated Section 17(a)(2) and (3) of the Securities Act of 1933 and Section 13(a) and (b)(2)(A) of the Securities Exchange Act of 1934 and Rules 13a-1, 13a-16, and 12b-20.  Bögli neither admitted nor denied the SEC’s findings that he was a cause of certain Credit Suisse violations.  Bögli agreed to pay an $80,000 penalty.

 

The SEC’s investigation was conducted by Matthew R. Estabrook and David S. Karp and supervised by Scott W. Friestad and Laura B. Josephs.  The SEC appreciates the assistance of the Swiss Financial Market Supervisory Authority.

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

Investment Adviser Charged With Cherry-Picking and Misleading Clients

The Securities and Exchange Commission today announced fraud charges against an investment adviser accused of “cherry-picking” profitable trades for his own account rather than a client’s accounts, and misleading seniors and other clients about the fees he charged and the risks in investments he recommended.

 

The SEC Enforcement Division alleges that Laurence I. Balter and his Kihei, Hawaii-based firm Oracle Investment Research purchased equities and options in an omnibus account and waited to allocate the trades until after they were executed and Balter knew whether they were profitable.  Balter allegedly allocated profitable trades to his own accounts and unprofitable trades to his client accounts.

 

The SEC Enforcement Division further alleges that Balter falsely told clients invested in his affiliated mutual fund they would not pay both advisory fees and fund management fees, yet he charged both fees anyway.  Balter also allegedly made trades for the mutual fund that deviated from two of its fundamental investment limitations and ultimately resulted in a non-diversified portfolio that caused significant losses to investors.

 

“We allege that Balter reaped more than a half-million dollars in ill-gotten gains by siphoning winning trades from his clients and withdrawing more than his fair share of management fees,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Investment advisers breach their fiduciary duty when they favor their own interests and force clients to take less profitable trades without their knowledge.”

 

The SEC Enforcement Division alleges that Balter violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, Section 17(a) of the Securities Act of 1933, Sections 206(1), 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8, and Sections 13(a) and 34(b) of the Investment Company Act of 1940.  The matter will be scheduled for a public hearing before an administrative law judge, who will prepare an initial decision stating what, if any, remedial actions are appropriate.

 

The SEC Enforcement Division’s investigation was conducted by Rebecca Lubens and Monique Winkler of the San Francisco office.  The SEC examination that led to the investigation was conducted by Karah To, Pamela Heijmans, Ada Chee, Edward G. Haddad, and Matt O’Toole of the San Francisco office.  The litigation is being led by Jason Habermeyer and Robert Tashjian. 

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.

SEC, FINRA and the MSRB to Hold Compliance Outreach Program for Municipal Advisors

The Securities and Exchange Commission, Financial Industry Regulatory Authority (FINRA), and the Municipal Securities Rulemaking Board (MSRB) today announced the opening of registration for the Compliance Outreach Program for Municipal Advisors to be held on November 10 as a live webcast on the MSRB website.

 

The SEC’s Office of Compliance Inspections and Examinations (OCIE) and Office of Municipal Securities are partnering with FINRA and the MSRB to sponsor the program, which will run from 3:00 p.m. to 4:30 p.m. Eastern time.  The webinar will highlight OCIE and FINRA staff examination findings on municipal advisors’ registration and give municipal advisors a detailed explanation of the registration process.

 

“This webinar is designed to promote compliance with municipal advisor registration rules by providing municipal advisor professionals the opportunity to hear from all three regulators on the important topics of initial and ongoing SEC and MSRB registration obligations,” said Jessica Kane, Director of the SEC’s Office of Municipal Securities.   

 

“This municipal advisor outreach will take municipal advisors through the registration processes at the SEC and the MSRB to help ensure proper regulatory compliance,” said Suzanne McGovern, Assistant Director of the SEC's broker-dealer and municipal advisor examination programs. 

 

Mike Rufino, FINRA’s Head of Member Regulation-Sales Practice, said, “The discussions covering the information required to complete the initial registration process and meet firms’ ongoing obligations will be valuable to municipal advisors.  Any firm that is uncertain as to the regulatory expectations of firms in completing and updating their municipal advisor applications will benefit from participating in the webinar.”

 

“This program is consistent with the MSRB’s goal of providing resources to municipal advisors to help them understand their regulatory obligations,” said Lynnette Kelly, Executive Director of the MSRB. “Municipal advisors will benefit from hearing first-hand from our staff.”

There is no cost to attend the program.  Registration is open to all municipal advisor professionals. Please register for the program here. 

 

Information on accessing the webcast will be posted on the SEC, FINRA and the MSRB websites on the day of the program.  For additional information visit the SEC, FINRA, or the MSRB website. 

SEC Press Release

--- If you need help with a securities litigation, arbitration or litigation issue, email Mark Astarita or call 212-509-6544 to speak to a securities lawyer.