Among recent enforcement actions by the SEC were a bar against radio personality Raymond Lucia associating with any investment advisor, broker or dealer, as well as other penalties, for his “Buckets of Money” violations; a freeze on the proceeds of illegal distributions of Biozoom stock; and a freeze on insider trader assets in the case of Onyx Pharmaceuticals. Also, a $9.5 million fine was levied by FINRA and exchanges on Newedge for failing to supervise trading by clients.
‘Buckets of Money’ Violations Bring Bar, Fines
Radio personality Raymond Lucia Sr., who in September of last year was the target of an SEC administrative proceeding over promoting his “Buckets of Money” strategy while never having backtested it despite claims to the contrary, is the focus of another ruling.
Cameron Elliot, SEC administrative law judge, barred Lucia from associating with any investment advisor, broker or dealer. The judge also revoked investment advisor registrations for him and his firm, Raymond J. Lucia Cos. (RJLC), and also imposed a $50,000 penalty against him and a $250,000 penalty against RJLC. The judge’s decision found that that RJLC had violated investment advisor antifraud statutes and that Lucia had aided and abetted RJLC’s violations.
Until the SEC got onto his case, Lucia had given investment seminars at which he touted his “Buckets of Money” strategy. At those seminars he claimed that extensive backtesting over extensive bear-market periods proved the strategy’s validity. In fact, however, he and his firm had done little, if any, backtesting to verify those claims.
FINRA, Exchanges Hit Newedge With $9.5M Supervisory Fine
FINRA along with BATS Exchange, New York Stock Exchange, NYSE Arca and NASDAQ censured and fined Newedge USA of Chicago $9.5 million for failing to supervise trading by clients that directly accessed U.S. equities markets through Newedge’s order routing platform and/or internet service providers (known as “direct market access,” or “DMA”) or routed orders directly to market centers (known as “sponsored access,” or “SA”).
Newedge also violated Regulation SHO and SEC Emergency Orders concerning short sales, and failed to obtain and retain books and records.
FINRA and the exchanges found that Newedge did not have sufficient procedures, adequate surveillance tools, or necessary information to monitor DMA and SA client trading. Newedge’s supervisory violations occurred over a four-year period, during which numerous internal documents noted the firm’s deficiencies. Even after these “red flags” were raised, Newedge did not take adequate steps to satisfy its supervisory obligations, FINRA found.
Purse Maker-Turned-Biomed Developer Is Focus of Insider Trading Case
Eight Argentine citizens have been charged, and their U.S. brokerage accounts frozen, on allegations of insider trading in the unregistered sale of millions of shares of Biozoom. Two other Argentine citizens who owned Biozoom shares but had not yet sold them have also seen the assets in their U.S. brokerage accounts frozen. Trading in the company’s shares was suspended the last week of June on concerns that insider trading was taking place.
In April, Biozoom, formerly Entertainment Art, announced that it was changing its name and making a drastic change in its business model; instead of producing leather bags, it was going to develop biomedical technology. The ten defendants, from March to June 2013, received more than 20 million shares of Entertainment Art; that amounted to one-third of the company’s total outstanding shares. The defendants claimed to have acquired the bulk of the shares in March from Entertainment Art shareholders who had bought them in private placements that began in 2007. While each of the defendants provided stock purchase agreements between themselves and the former shareholders that were purportedly signed by the defendants and those shareholders, the Entertainment Art investors had actually sold all their stock in the company nearly four years before, in 2009; That, said the SEC, made the documents false.