Broker Charged With Illegally Accepting $1M in Cash Kickbacks: Enforcement

The Securities and Exchange Commission charged a Wall Street stockbroker with illegally accepting more than $1 million in undisclosed kickbacks for giving certain customers preferential access to lucrative inital public offerings, enabling them to reap major trading profits in the secondary markets.

The SEC alleges that Brian Hirsch subverted allocation policies and procedures at two brokerage firms where he worked on the wealth syndicate desk, making long-running arrangements with certain customers to give them larger allocations of coveted public offerings being marketed by the firms. In most instances, the customers sold their stock into the market as soon as possible to turn a substantial profit at the expense of the firms’ other brokerage customers and the issuers’ interests in raising capital from long-term investors.

“Kickback schemes are pernicious and have no place in the securities markets,” said Sanjay Wadhwa, senior associate director for Enforcement in the SEC’s New York Regional Office. “As alleged in our complaint, Hirsch lined his own pockets by secretly sharing in customer trading profits that he engineered in violation of his obligations to his employers.”

The SEC’s complaint also charges Hirsch’s customer Joseph Spera, who allegedly made approximately $4 million in trading profits on the offering allocations he received from Hirsch. Spera allegedly paid Hirsch approximately $1 million in cash.

The U.S. Attorney’s Office for the District of New Jersey has filed parallel criminal charges against Hirsch.

Advisor Charged With Bilking Clients to Renovate Farm, Buy Art

The SEC charged a Raleigh, North Carolina-based investment advisor with running a Ponzi scheme that primarily targeted his clients, many of whom were retired and elderly.

The SEC alleges that Stephen Peters, through his firm VisionQuest Wealth Management, sold promissory notes issued by another one of his companies, VisionQuest Capital, to clients and other prospective investors while making false statements. These false statements included that proceeds would be invested into revenue-producing businesses with neither Peters nor his businesses receiving compensation. Peters allegedly claimed that the VisionQuest Capital notes presented little or no risk of loss and were “guaranteed.”

According to the SEC’s complaint, investor funds were not used as Peters claimed. Peters allegedly spent at least $4.4 million on such personal endeavors as remodeling a large farm in North Carolina, purchasing fine art for his home, and constructing a vacation home in Costa Rica. Peters also spent at least $4.9 million to make Ponzi payments to earlier investors.

The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as injunctions. In a parallel action, the U.S. Attorney’s Office for the Eastern District of North Carolina today announced criminal charges against Peters, including a charge that alleges that Peters attempted to withhold and conceal records from the SEC, fabricated records, and provided false testimony in the SEC’s investigation of Peters’ scheme.

FINRA Fines Raymond James $2 Million Over Emails

FINRA fined Raymond James Financial Services $2 million for failing to maintain reasonably designed supervisory systems and procedures for reviewing email communications.

In addition, Raymond James has agreed to conduct a risk-based retrospective review to detect potential violations evidenced in past emails.