Articles Posted in SEC

The SEC charged Allen with fraud for allegedly operating a $31 million Ponzi Scheme.  Allen, with his accomplice Susan Daub, formed a company that made high-interest, short-term loans to athletes.  The loans were funded by money from investors, but Allen used the capital for various expenses. More than 40 people invested money in Allen’s Ponzi scheme dating back to 2012,

Prosecutors say former cornerback Will Allen and partner Susan Daub pleaded guilty to federal fraud, conspiracy and money laundering charges in federal court in Boston. Prosecutors say they took in more than $35 million and repaid less than $22 million.

The indictment details that Allen received $4.1 million of the proceeds and that Daub, who was accused of committing 20 felonies, received $239,000.  Allen’s indictment includes 12 counts of wire fraud, six counts of aggravated identity theft, one count of conspiracy to commit wire fraud and four counts of illegal monetary transactions. If convicted, Allen faces up to 20 years on each wire fraud charge and shorter sentences for the remaining felonies.

The Securities and Exchange Commission (SEC) announced Feb. 14, 2017 that Morgan Stanley Smith Barney will pay $8 million and admit wrongdoing after allegations related to single inverse ETF (exchange –traded fund) investments it recommended to advisory clients.

The ETFs are supposedly unsuitable for long-term investing.  EFTs generally should be sold within one trading cycle.  Morgan Stanley, however, allegedly solicited the ETFs to clients for retirement.

“Morgan Stanley recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients,” said Antonia Chion, associate director of the SEC Enforcement Division.

Generally, when we think of investing, we think of stocks and bonds. Now, however, there seems to be an increasing trend for investment advisors to recommend alternative investments to their clients. Although there is no clear definition of alternative investments, these are non-traditional investments that can include tangible goods such as hedge funds, private equity, commodities, and many others.

Late last month the Securities and Exchange Commission (SEC) issued a Risk Alert pertaining to studies conducted over a six-year period by its staff. These studies were of investment advisors who offer alternative investments to their clients. Of particular concern to the SEC Staff was the due diligence processes of these advisors. Due to the nature of these investments, the SEC Staff’s primary purpose was to ensure that advisors who recommend or place these investments on behalf of their clients are enacting and maintaining a high level of due diligence. This can be more difficult than with traditional investments because they can include private investment opportunities or other offerings of greater complexity.

“Money continues to flow into alternative investments. We thought it was important to assess advisors’ due diligence processes and to promote compliance with existing legal requirements, including the duty to ensure that such investments or recommendations are consistent with client objectives,” said Drew Bowden, Director of the SEC’s Office of Compliance Inspections and Examinations.