Policy Patty Toolkit 

Making the world a little more compliant one toolkit at a time.


Citigroup to Pay More Than $10 Million for Books and Records Violations and Inadequate Controls

Posted on August 16, 2018 at 6:40 PM
The SEC announced that Citigroup has agreed to pay $10.5 million in penalties to settle two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary. In the first action, Citigroup Inc. and its U.S. broker-dealer subsidiary Citigroup Global Markets ... Read Full Post »

SEC Charges Ameriprise Financial Services for Failing to Safeguard Client Assets

Posted on August 15, 2018 at 11:00 AM

The SEC announced that Ameriprise Financial Services Inc. will pay $4.5 million to settle charges that it failed to safeguard retail investor assets from theft by its representatives.

According to the SEC’s order:

  • Five Ameriprise representatives committed numerous fraudulent acts, including forging client documents, and stole more than $1 million in retail client funds over a four-year period. 
  • Ameriprise, a registered investment adviser and broker-dealer, ...
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SEC Charges BGC Financial for Failure to Preserve Documents and Maintain Accurate Books and Records

Posted on July 18, 2018 at 10:30 AM

The SEC announced that New York-based broker-dealer BGC Financial has agreed to pay a $1.25 million penalty to settle charges that it failed to preserve audio files sought by the SEC and inaccurately recorded travel, entertainment, and other expenses.

The SEC’s order finds that:

  • after receiving document requests in 2014 from the SEC’s Division of Enforcement, BGC deleted audio files for the recorded telephone lines of eight brokers that were responsive to the docu...
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SEC Charges Oil Company CEO, Board Member With Hiding Personal Loans

Posted on July 17, 2018 at 8:05 AM

The SEC charged the former CEO of Energy XXI Ltd. with hiding more than $10 million in personal loans that he obtained from company vendors and a candidate for Energy XXI’s board. At the time of the alleged misconduct, Energy XXI was NASDAQ-listed and one of the largest oil and gas producers on the Gulf of Mexico shelf.

According to the SEC’s complaint:

  • CEO John D. Schiller Jr. maintained an extravagant lifestyle by using a highly leveraged margin account secu...

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Former CEO and CFO of ITT Barred and Ordered to Pay Penalties

Posted on July 10, 2018 at 8:05 AM

The SEC announced settlements with two former senior executives of ITT Educational Services Inc., which the SEC charged hid its true financial condition from investors. This resolution successfully concludes the SEC’s case, which was scheduled to begin trial on July 9.

Former CEO Kevin Modany and former CFO Daniel Fitzpatrick are barred from holding senior positions at public companies and ordered to pay penalties in the settlements filed in federal court in Indiana.

The SE...

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FINRA Requests Comment on Proposed Amendments to FINRA Rule 4521 and New Supplemental Liquidity Schedule

Posted on January 9, 2018 at 8:45 PM

FINRA is seeking comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports). These changes would require specified member firms to notify FINRA no more than 48 hours after specified events that may signal an adverse change in liquidity risk.

Additional changes include a proposed new Supplemental Liquidity Schedule (SLS). These requirements provide:

• member firms with the largest customer and counterparty exposures would file as a suppleme...

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Report on File Sharing and Collaboration Leads to Security Gaps in Financial Services Firms

Posted on January 3, 2018 at 11:05 AM

QuinStreet and BlackBerry conducted a survey of 200 IT professionals in financial services and found gaps in securing and sharing business files. Their report provides:

• How email, rogue employees, consumer-grade applications and bad actors cause lapses in corporate security

• Why some financial institutions are resorting to inefficient means, like mail and fax, to share documents

• How secure content collaboration solutions can make a difference, and what...

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Email Issues and Deficiencies - Regulatory Actions

Posted on December 14, 2017 at 9:25 AM

I thought this recent blog from Marianna Shafir in the SMARSH blog was a good read on the continuing issues for firms regarding inadequate electronic communication policies, supervision, and records. Marianna uses four recent FINRA actions and requirements to highlight this point. Consider:

• Recent Regulatory Actions

o A firm was censured and fined $175,000 for failing to maintain electronic brokerage records related to approximately 46 million market-making transactions in...

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Falsified Consolidated Reports Result in Frauds Against Clients

Posted on December 14, 2017 at 8:25 AM

Check out the write-up in Financialish.com about an SEC Administrative Law Judge order against Coastal Equities and Coast Investment Advisors (the “Respondents”) to each pay a $40K fine for failure to supervise a former executive officer who defrauded clients out of millions. The alleged fraud that took place involved Michael Donnelly, an executive of the Respondents, as follows:

• From at least 2009 through 2014, Donnelly stole approximately $1.5 million from 12 ...

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SEC Charges Biopharmaceutical Company With Failing to Properly Disclose Perks for Executives

Posted on December 13, 2017 at 7:45 AM

The SEC charged Tennessee-based Provectus, a biopharmaceutical company, with committing a series of accounting controls and disclosure violations, including the failure to properly report as compensation millions of dollars in perks provided to its then-CEO and then-CFO. In sum, Provectus was found to lack sufficient controls surrounding the reporting and disclosure of travel and entertainment expenses submitted by its executives.

The complaint alleged that reimbursement of travel and...

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