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July 21, 2017 at 01:11 AM
Cetera Advisor Networks and Cetera Advisors were both censured and required to provide a plan to FINRA to remediate eligible customers who qualified for, but did not receive, an applicable mutual fund sales-charge waiver, according to FINRA’s July disciplinary actions.
As part of Cetera Advisor Networks’ settlement, the firm agreed to pay restitution to eligible customers, which is estimated to total $1,911,080 (the amount eligible customers were overcharged, inclusive of interest). And, as part of Cetera Advisors’ settlement, the firm agreed to pay restitution to eligible customers, which is estimated to total $628,040 (the amount eligible customers were overcharged, inclusive of interest).
Without admitting or denying the findings, both firms consented to the sanctions and to the entry of findings that it disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge.
The findings stated that these eligible customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.
These sales disadvantaged eligible customers by causing the customers to pay higher fees than they were actually required to pay.
The findings also stated that the firms failed to reasonably supervise the application of sales-charge waivers to eligible mutual fund sales.
The firms “relied on its financial advisors to determine the applicability of sales-charge waivers, but failed to maintain adequate written policies or procedures to assist financial advisors in making this determination,” according to FINRA.
In addition, FINRA says, the firm failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales-charge waivers for eligible customers. The firm also failed to adopt adequate controls to detect instances in which they did not provide sales-charge waivers to eligible customers in connection with their mutual fund purchases.
As a result of Cetera Advisor Networks’ failure to apply available sales-charge waivers, the firm estimates that eligible customers were overcharged by at least $1,666,404 for mutual fund purchases made since July 1, 2009. And as a result of Cetera Advisors’ failures, the firm estimates that eligible customers were overcharged by at least $553,398 for mutual fund purchases made since July 1, 2009.
SEC Bars Lawyer Who Committed Fraud
The Securities and Exchange Commission barred a New York-based attorney from appearing or practicing before it and acting as an officer or director of a public company after finding that he made false and misleading statements in corporate filings.
The SEC’s order finds that David Lubin committed fraud while serving as a director and corporate counsel of Entertainment Art, a public company in which Lubin also was a large shareholder. Lubin negotiated the sale of all of the outstanding stock of Entertainment Art, including both restricted and previously registered shares that were purportedly “free trading,” to an acquaintance interested in purchasing shell companies.
Absent a valid exemption, common ownership of all of the shares of a public company would require the owner to register the shares for resale to the public. According to the SEC’s order, Lubin fraudulently misrepresented in Entertainment Art’s corporate filings that the purportedly free-trading shares had not been purchased by the acquaintance. This left the false impression that those shares remained immediately available for public resale. During the next two years and until he left the company, Lubin drafted and signed SEC filings that continued to lie about the true ownership of the company’s stock.
According to the SEC’s order, soon after the company was renamed Biozoom, more than 14 million shares were resold to the public in an illegal unregistered distribution for illicit proceeds of $34 million. The SEC froze assets from the unregistered sales in 2013.
The SEC’s order prohibits Lubin from representing clients in SEC matters, including investigations, litigation, or examinations, and from advising clients about SEC filing obligations or content. The SEC ordered a public hearing before an administrative law judge to prepare an initial decision determining what, if any, disgorgement or monetary penalties are in the public interest.
The U.S. Attorney’s Office for the Southern District of Florida announced criminal charges against Lubin.
SEC Files Fraud Charges Against Alleged Market Manipulators
The SEC announced fraud charges against two California men and a company behind an alleged scheme to manipulate the stock prices of two shell companies.
The SEC alleges that Troy Flowers and his partner Sean Nevett illegally concealed their control and ownership of Licont Corp. and Artec Global Media by using multiple accounts that they controlled in the names of other people and entities. They then allegedly created the false appearance of active trading by making manipulative trades from those accounts to inflate the stock prices.
