Rulebook

The Blotter Report: Sneaky Strategies Backfire

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Talkative Tippler

An owner of a New York-based advisory firm and his stockbroker are in trouble after they traded on confidential information provided by a tipsy lawyer working on a pharmaceutical merger.

The SEC charged Long Island-based Tibor Klien and former Ameriprise broker Michael Shechtman with securities fraud on Friday. Klien learned about Pfizer’s planned acquisition of King Pharmaceuticals through his friend, Robert M. Schulman, a D.C.-based partner with Hunton & Williams. According to the SEC, Schulman blurted out the information after several glasses of wine one weekend in August 2010.

Klien then took the information and shared it with Shechtman, who bought up thousands of shares for both of them. When King announced the merger, both sold out, making more than $400,000 combined through the scheme.

The regulator is seeking disgorgement of the illegally gained profits, damages and legal fees, as well as an order barring the two from the industry.

 

Far-Reaching Consequences

The former south Florida attorney Scott Rothstein has embroiled yet more parties in his net, four years after he admitted to running a massive $1.2 billion Ponzi scheme.

TD Ameritrade agreed to pay the SEC $15 million and $37.5 million to the Office of the Comptroller of the Currency to settle claims the Canadian bank failed to properly alert authorities to the suspicious activity in accounts linked to Rothstein’s scheme.

The regulator further claimed that a former regional vice president for the bank had misled investors, saying that Rothstein—who is now serving a 50-year prison sentence—had limited access, when in reality he could move unlimited amounts of money.

Under Monday’s settlement agreement, TD neither admitted nor denied the charges and agreed to pay the fine.

 

Raiding the Jackpot

A California Whole Foods employee who hit it big in2009 recently sued his financial advisors, claiming they were trying to convince him to take on bad investments to gain huge commissions. Kevyn Ogawa—who won a $168 million lottery drawing—sued Clinton Hodges and Kyle Dunphy of the wealth management firm EFG Capital Advisors, according to Courthouse News.

The former grocery store employee discovered the pair’s bad investment advice after they attempted to sell him a $600 million life insurance policy. Ogawa sought a second opinion from another advisor, which led to uncovering the trail of bad advice.

The suit claims the two registered investment advisors breached their fiduciary duty and displayed professional negligence.  Their firm, EFG Capital Advisors, is not named in the suit.

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Compliance, regulatory and legal issues, with a fair amount of cops and robbers for fun.

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