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May 13, 2016 at 04:39 AM
Among recent enforcement actions by the Securities and Exchange Commission were charges against a father and son and five of their associates in a scheme to defraud investors with phony Native American tribal bonds.
In addition, the Financial Industry Regulatory Authority has censured Stephens Inc. and fined the firm $900,000 for inadequate supervision of “flash” emails sent by research analysts, and censured and fined Securities America $250,000 after finding the firm allowed sales of notes for an unregistered limited partnership investment without having done adequate due diligence.
SEC Charges Father, Son, 5 Others With Bilking Native American Tribe
Jason Galanis, who has a checkered history with the SEC; his father, John Galanis; and five others were charged by the SEC with defrauding investors in sham Native American tribal bonds so they could steal millions of dollars in proceeds for their own extravagant expenses and criminal defense costs.
The younger Galanis, who faced stock fraud charges last year along with his father, had also been embroiled in an accounting fraud case in 2005 thanks to his holdings of Penthouse International stock. In this case, he and his father persuaded a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to issue limited recourse bonds that the father-and-son duo had already structured. Galanis then acquired two investment advisory firms and installed officers to arrange the purchase of $43 million in bonds using clients’ funds.
But instead of investing the bond proceeds, as promised, in annuities to benefit the tribal corporation and generate sufficient income to repay bondholders, the money wound up in a bank account in Florida belonging to a company controlled by Jason Galanis and his associates.
Among their alleged misuses of the misappropriated funds were luxury purchases at such retailers as Valentino, Yves Saint Laurent, Barneys, Prada and Gucci. Investor money also was diverted to pay attorneys representing Jason and John Galanis in a criminal case brought parallel to the SEC’s stock fraud charges last year.
Also charged were Devon Archer of Brooklyn, New York; Bevan Cooney of Incline Village, Nevada; Hugh Dunkerley of Huntington Beach, California and Paris, France; Gary Hirst of Lake Mary, Florida; and Michelle Morton of Colonia, New Jersey. They’re charged with violations of the antifraud provisions of the federal securities laws and related rules.
The SEC seeks disgorgement plus interest and penalties, as well as permanent injunctions. In addition, the agency seeks officer-and-director bars against Jason Galanis, Archer, Dunkerley and Morton.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against the same seven individuals. The SEC’s investigation is continuing.
FINRA Fines Stephens Inc. $900,000 on ‘Flash’ Emails From Analysts
FINRA has censured Stephens Inc. of Little Rock, Arkansas, and fined the firm $900,000 on findings that it inadequately supervised firmwide internal “flash” emails sent by its research analysts to convey information about companies and industries the firm covered. Those failures created the risk that the flash emails could potentially include material nonpublic information that might be misused by sales and trading personnel.
