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April 25, 2015


Today's BrokeAndBroker.com Blog discusses a civil Complaint involving the somewhat esoteric legal issue of "spoliation," which involves the alleged destruction or alteration of evidence. Although that doesn't necessarily sound like a riveting story, consider the fact that the federal lawsuit under consideration names as one of the Defendants Wall Street's self-regulatory organization, the Financial Industry Regulatory Authority ("FINRA"). READ

SEC Awards Compliance Officer Million Dollar Whistleblower Bounty

On April 22, 2015, the Securities And Exchange Commission announced it was awarding to a compliance professional a whistleblower award of between $1.4 and $1.6 million. According to the SEC's Press Release "SEC Announces Million-Dollar Whistleblower Award to Compliance Office," the compliance officer: 

had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substanital harm to the company or investors.

The Press Release asserts that this is only the second award made to an internal audit/compliance employee. Apparently a second Claimant's request for an award was denied in the underlying matter. READ

FULL TEXT Criminal Complaint in USA v. Sarao Flash Crash Case at BrokeAndBroker

On April 21, 2015, Nvinder Singh Sarao, 36, Hounslow, United Kingdom was named as a Defendant in a criminal Complaint  alleging 1 count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and 1 count of "spoofing." United States of America, Plaintiff, v. Nvinder Singh Sarao, Defendant (Complaint, NDIll, 15-CR-75, February 11, 2015).Sarao was arrested and is facing extradition to the United States pursuant to an unsealed Complaint. The allegations suggest that he was responsible (in whole or in part) for the infamous May 6, 2010 "Flash Crash" which saw various market indices plummet within a matter of minutes. At the heart of the government's Complaint is the assertion that Sarao used an automated trading program to manipulate the E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange. READ

FINRA Arbitrators Expunge Customer Settlement Contribution From Merrill Lynch Broker

Among the false perceptions that many have is the reliability of so-called official records. If it's something maintained by a regulator, we tend to believe that there are so many levels of checks and balances that a falsehood would not ultimately makes its way into a database accessible by the public. In fact, as has been demonstrated over and over again, our expectations and reality don't always match. In a recent FINRA expungement arbitration, FINRA's online BrokerCheck records asserted that a former Merrill Lynch registered representative had contributed half of the financial settlement paid to a complaining customer -- except the rep adamantly insisted that he had not made any contribution.  READ

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In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2013, Claimant Marriott asserted breach of fiduciary duty; common law fraud; violation of the Texas Securities Act; violation of the Texas Deceptive Trade Practices Act; and lack of adequate supervision in connection with allegedly unsuitable purchases purportedly made in Claimant's Individual Retirement Account without her knowledge or consent. Among the disputed transactions were alleged short-term trades in shares of Apple, Rare Element Resources Ltd., and Zynga,. Claimant also cited trades in exchange-traded inverse funds ("ETFs"), including ProShares, Rydex, and Direxion. In addition to her allegations above, Finally, Claimant alleged that Respondent Hobbs had developed over-concentrated position of AIG shares. In the Matter of the FINRA Arbitration Between Patricia Marriott, Claimant / Counter-Respondent, vs. Andrew Garrett, Inc., Respondent, and Brian Keat Hobbs, Respondent /Counter-Claimant (FINRA Arbitration 13-00769, April 1, 2015). READ

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