DOL, SEC, FINRA Enforcement Roundup: DOL Recovers $43 Million for Madoff Victims

The pair did not disclose the change to investors, nor did they let anyone know—except privately, within the firm—that should Gottex decide to redeem its investments, the fund would “tank,” in Bryson’s opinion. Instead, investors were reassured as to redemption levels holding steady—when they were actually mounting—and were told nothing of liquidity problems.

In September of that year, however, the firm had to stop redemptions and cease raising new funds when redemption requests hit $545 million. It tried several times to restructure, but to no avail, and in March of 2011 it and its affiliates filed for bankruptcy.

Bryson, Gutekunst, and Pereira face a range of charges, in addition to the SEC seeking a variety of sanctions and relief that include injunctions, disgorgement of ill-gotten gains with prejudgment interest, and penalties. Tara Bryson has agreed to settle with the SEC, with the settlement awaiting court approval. SEC Charges Virgin Islands-Based Advisor With Defrauding Clients

James Tagliaferri was charged by the SEC with defrauding clients of his St. Thomas-based firm TAG Virgin Islands, and also faces criminal charges from the U.S. Attorney’s Office for the Southern District of New York over the same actions, after he withheld information on kickbacks he received and then used client funds in a Ponzi-type scheme.

Some time around 2007, according to the SEC, Tagliaferri abandoned an earlier strategy of investing TAG client funds primarily in conservative and liquid investments that included municipal bonds and blue chips. He turned instead to highly illiquid securities that included promissory notes issued by a few closely held private companies that turned out to be holding companies through which an individual and his family effected personal and business transactions. He also sank at least $40 million in client funds into the notes of International Equine Acquisitions Holdings, a private horse-racing company.

Using his discretionary authority over client accounts, Tagliaferri bought these securities in exchange for more than $3.35 million in cash and approximately 500,000 shares of stock of a microcap company. He never disclosed this arrangement to clients, despite its conflict of interest, and when promissory notes came due and clients wanted their money, he would use funds from other clients to pay them by investing their funds in microcap and other thinly traded public companies. He raised at least $80 million this way, so that he could pay the interest or principal due to other clients on some of the notes.

He also spelled out the scheme in e-mails he sent in April of 2010 to the individual behind the holding companies in which he had invested his clients’ funds. The clients, of course, knew nothing of this. The SEC’s investigation is continuing.

Lightspeed Trading Censured, Fined $200,000 by FINRA

FINRA censured and fined New York-based Lightspeed Trading $200,000 for failure to submit new order reports and route reports to the Order Audit Trail System (OATS). The firm neither admitted nor denied the findings, but consented to FINRA’s actions; it will also be required to revise its WSPs regarding complete and accurate OATS reporting of the firm’s orders routed to its affiliates.

Lightspeed’s customer orders were directly placed into its affiliate’s order routing, execution and technology platform, and data on these orders was reported to OATS immediately by other member firms. Lightspeed mistakenly believed, according to the findings, that reports were not required for orders routed to its affiliate. The firm’s supervisory system, including WSPs, were built around this error. In addition, there were other failures in reporting and compliance.