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Securities Fraud

Indy Lawyer Suspended For $19M Ponzi Scheme

Indianapolis lawyer, Charles B. Blackwelder, has been suspended from the practice of law following a guilty plea to four Class B felony counts of securities fraud. He and his daughter, Cara Grumme, were accused of scamming more than 300 elderly Indiana residents of more than $19 million. The securities involved 35 residential properties located in Carmel, Fishers and elsewhere in Hamilton County, as well as some commercial property in Hamilton, Hancock and Marion counties. According to the Indiana Secretary of State’s Office, CFS, LLC – Blackwelder’s company – sold securities, marketing investments in rental properties to seniors as a means to...

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Innaccurate Data Costs Virtus $16.5 Million

The Securities and Exchange Commission (SEC) settled with Virtus Investment Advisers for $16.5 million, from charges stemming from publicized false performance data. the report was generated by subadviser F-­Squared, which was ultimately found to be significantly fabricated, according to a SEC statement. F-­Squared was already facing its own battles, which include filing for bankruptcy in July and paying a $35 million settlement, due to defrauding investors through falsified performance advertising. Andrew J. Ceresney, director of the SEC Enforcement Division, stated “Virtus accepted F-­Squared's historical performance misrepresentations at face value and ignored red flags that called these statements into question, and if an investment adviser chooses to advertise, it is responsible...

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Trading Fraud Scheme Ends in Guilty Verdict as One Perpetrator Eats Evidence

Steven Metro, a former managing clerk at the prestigious New York law firm Simpson Thacher & Bartlett, was the third individual to plead guilty for conducting an insider trading scheme in which evidence written on a napkin was consumed to conceal the impropriety. Metro pleaded guilty to one count of securities fraud, as well as one count to commit securities fraud and tender offer fraud. A third count was dismissed before U.S. District Judge Michael Shipp in Trenton, New Jersey. Attempts to reach Metro’s lawyer, James Froccaro, have not been responded to. Edible Fraud Scheme? Metro, 41, of Katonah, New York, was accused of passing tips about mergers and...

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SEC Fines Accountants Over Missed Red Flags In Securities Fraud Case

CPA Firm Grant Thornton, LLP and two of its partners were recently sanctioned by the U.S. Securities and Exchange Commission over claims that they missed red flags when inspecting two publicly traded companies that were the focus of SEC enforcement actions due to accounting violations and other issues. An admission of wrongdoing from Grant Thornton, and a $3 million fine, was part of the settlement. In addition, Grant Thornton had to disgorge more than $1.5 million in audit fees and prejudgment interest. Two managing partners for Grant Thornton’s Wisconsin practice settled with the SEC – Melissa Koeppel and Jeffrey Robinson. Neither admitted...

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Former JP Morgan Adviser Guilty of $20M Client Theft

In a New York federal court, a former JPMorgan Chase & Co. investment adviser has plead guilty to stealing over $20 million from clients. In addition, he has admitted to squandering funds on unprofitable trades and personal expenses. Michael Oppenheim, 49, plead guilty to embezzlement and securities fraud on November 5, 2015. He also agreed to hand over $22.4 million in forfeiture. Oppenheim faces between 8 to 10 years in prison. He may not appeal any sentence within or below that range. Charged in a criminal complaint earlier this year, Oppenheim has been in home detention – his movements monitored by a GPS...

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SEC Identifies Lack of Compliance Programs

Investment adviser firms’ growing use of outside chief compliance officers has prompted the U.S. Securities and Exchange Commission to identify several that are not effectively implementing compliance programs. The Office of Compliance Inspections and Examinations has detailed the results of over a dozen examinations conducted by the SEC of investment advisers and investment companies’ CCOs. While some were found to be generally effective in administering compliance programs, others failed to ensure that the advisers adhered to compliance policies, as well as other issues. A risk alert issued by the OCIE cautioned funds and advisers with outsourced CCOs to make certain that...

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Fidelity Charged with Unethical Behavior

Generating fees for the firm and unregistered advisers has been deemed unethical behavior by the commonwealth of Massachusetts. According to a statement from the secretary of commonwealth, William Galvin, at least 13 unregistered Massachusetts investment advisers used Fidelity’s broker-dealer platform. Gavin said, “Fidelity served as a haven from regulatory oversight as it ignored blatant unregistered investment advisory activity.” Fidelity has issued a public statement defending itself. Adam Banker, a Fidelity spokesman said, “We do not believe that Fidelity has violated any laws or regulations in connections with this matter. We look forward to reviewing the details of this matter and addressing them...

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SEC Hammers Down on Securities Fraud, Records Highest Fines in 2015

The Securities and Exchange Commission targeted multiple types of fraudulent behavior this year as it filed a record high of enforcement actions and fines against individuals and companies, said the agency. The agency obtained $4.2 billion in penalties, resulting in a 7% increase from the previous fiscal year 2014. Kohlberg Kravis Robert & Co. took a massive blow, as the SEC levied actions against them for improperly allocating $17 million in “broken deal” expenses. Also, Edward D. Jones & Co. was penalized for pricing fraud in municipal securities. SEC Provides Transparency in Securities Fraud Cases The agency has been more focused on enforcement, led...

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Adviser Access to Outside Accounts of Clients Forces SEC Hand

The Securities and Exchange Commission (SEC) is cracking down on advisers who can access their clients’ employer sponsored retirement accounts. Managing director of Graydon Compliance Solutions, Kevin Woodard, has declared that the agency will closely monitor scenarios in which clients have given their advisers usernames and passwords for financial accounts that are not managed by their adviser. At the National Association of Personal Financial Advisors fall conference in Indianapolis, Woodard said, “If you can’t prove you can’t steal from it, you should say you have custody.” Potential for Adviser Abuse The multibillion dollar rip off by Bernie Madoff, who maintained control of...

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$18M to FINRA by 5 Firms for Overcharging Funds

Five broker-dealers have been ordered by the Financial Industry Regulatory Authority to pay more than $18 million in restitution for overcharging charities and retirement funds on mutual fund sales. Among the broker-dealers are Edward D. Jones & Co. LP and Stifel Nicolaus & Co. Inc. The firms failed to waive sales charges on the mutual funds. To date, FINRA has collected $55 million in restitution to return to 75,000 eligible accounts. “These actions are further evidence of our commitment to pursue substantial restitution for adversely affected mutual fund investors who were not afforded the full benefit of available sales charge waivers,” says...

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