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June 2014 Archives

Protecting Whistleblowers: The SEC’s First Anti-Retaliation Enforcement Case

A landmark case of whistleblower anti-retaliation enforcement has recently been settled between the Securities and Exchange Commission (“SEC”) and the advisory firm Paradigm Capital Management (“Paradigm”) and Candace King Weir (“Weir” the majority owner of paradigm) in the first case of its kind under the SEC’s "new authority to protect whistleblowers against retaliation by employers." After a trader exposed evidence to the SEC of Weir’s involvement in causing Paradigm to engage in principal transactions to reduce tax liability on behalf of its hedge fund investors without effective disclosures or consent, Paradigm targeted the trader for retaliation. The SEC pressed anti-retaliation charges, amongst others, resulting in a settlement of $2.2 million paid out by Paradigm without the admission of wrongdoing.

JLG Legal Risk Management Tip – California’s Revised Custody Rule Seeks Uniformity

027455-glossy-black-icon-culture-state-californiaJacko Law Group, PC (“JLG”) each month publishes a Legal Tip, written by one of its professional staff on a relevant topic specific to the securities industry. In late May 2014, JLG’s Attorney, Robert Boeche, wrote and released a Legal Tip that highlights California’s recent adoption of revisions to the investment adviser custody rule (California Code of Regulations, Title 10, Section 260.237) (the “Rule”) by the California Department of Business Oversight (“DBO”), and how these revisions and additions to the custody Rule impact California investment advisers.

IST Shareholder Services Charged by SEC in Misappropriation Scheme

The role of a transfer agent is a unique – and powerful – position in the securities industry. Transfer agents are used by publically traded companies and other issuers “to keep track of individuals and entities owning stocks and bonds [of these companies]” by “recording changes of ownership of securities, maintaining issuers’ security holder records, cancelling and issuing securities certificates, and distributing dividends.” Their place as pseudo-gatekeepers of their client’s securities books and records, and their ability to be “entrusted with millions of [client] dollars,” is a position that the Illinois Stock Transfer Company (“IST”) abused, according to a recent Securities and Exchange Commission (“SEC”) press release.

Under the (Unregistered Broker-Dealer) Table: Rafferty Capital Markets and Illegal Trading

The Securities and Exchange Commission ("SEC") recently charged Rafferty Capital Markets ("Rafferty") with illegally facilitating trades for an unregistered broker-dealer. A May 15, 2014 SEC press release details how Rafferty settled an SEC-charged penalty of $850,000 for perpetrating "illegally arranged trades for an unregistered broker-dealer" and keeping "inaccurate books and records" from mid-2009 to early 2010. Numbering at around 100 asset-backed securities trades, Rafferty - a licensed firm who facilitated the trades for the unregistered (and unnamed by the SEC) firm - received 15% of the more than $4 million in compensation produced from the trades.

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