Eccleston Law Blog

The U.S. Securities and Exchange Commission announced that it had obtained a temporary restraining order (“TRO”) against Paul Horton Smith, Sr. in an effort to halt an on-going Ponzi scheme.  The SEC said that it also froze Smith’s assets. According to the SEC, Smith was running a Ponzi scheme that targeted senior citizens in Southern California. The SEC alleged that Smith used eGate, LLC, his investment advisory firm, and Planning Services, Inc., his insurance and estate planning company, to market securities in another one of his companies, Northstar Communications, LLC.

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Former Merrill Lynch broker, Christopher M. Roumayeh, agreed to a $15,000 fine and a 21-month suspension from association with any FINRA member firm in all capacities.  According to FINRA Enforcement, Roumayeh engaged in outside business activities without providing prior written notice to his firm.

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The upcoming implementation of Regulation Best Interest (“Reg B-I”) has broker-dealers wondering how Reg B-I fits in with FINRA’s suitability rule. Robert Colby, FINRA’s chief legal officer, recently provided guidance on the effect Reg B-I will have on FINRA’s rules.

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A federal court judge in Florida denied Regions Bank’s motion to reinstate a temporary restraining order (“TRO”) filed against the bank’s former financial advisors, Michael Montalvo and Mauricio R. Cardenas.  Regions Bank sought a TRO in an effort to restrain Montalvo and Cardenas from soliciting former clients serviced at Regions Bank.

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The U.S. Securities and Exchange Commission (“SEC”) filed a Complaint against Paul R. Montgomery, Jr., Michael D. Fisher and James H. Willingham, Jr. (collectively “Defendants”), alleging that Defendants committed fraud in connection with the sale of joint venture interests in two oil and gas projects.  According to the SEC, Defendants told investors that new oil and gas wells would be drilled and existing wells would be reworked as part of Navarro Phase I project and Seguin Development Phase II project. The SEC alleged that Defendants promised investors 32% returns on their investment.

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Steven Hour Heng was terminated from Wells Fargo Advisors following what Wells Fargo determined to be improper cash withdrawals from his personal bank account. According to the Form U5 filed by Wells Fargo, in December 2019, Heng made six cash withdrawals in an amount that was designed to avoid currency transaction reporting requirements. Under the Bank Secrecy Act, banks are required to report any transactions above $10,000. Heng is disputing Wells Fargo’s characterization of the situation.

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Merrill Lynch agreed to a censure and a $150,000 fine to settle alleged violations with FINRA Enforcement.  According to FINRA Enforcement, Merrill Lynch allowed an executive to function as a principal in its prime brokerage business, despite the fact that the executive was not registered with FINRA.

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Morningstar Credit Ratings, LLC has agreed to pay $3.5 million to settle charges brought by the U.S. Securities and Exchange Commission (“SEC”).  The SEC charged Morningstar with violating a conflict of interest rule which was designed to separate credit ratings and analysis from sales and marketing.

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The Payroll Protection Program (“PPP”), designed to provide loans to small businesses, has been mired in controversy. Multiple companies, including Shake Shack, Potbelly and the Los Angeles Lakers, have repaid loans received from the PPP after public backlash.  The U.S. Securities and Exchange Commission (“SEC”) has begun conducting a sweep of public companies that received loans from the PPP.

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Final judgement has been entered in the federal case brought by the U.S. Securities and Exchange Commission (“SEC”) against Neil Burkholz and Frank Bianco for an alleged Ponzi scheme they ran.  The SEC had already obtained a temporary restraining order and preliminary injunction against Burkholz and Bianco.

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