Articles Posted in SEC

Shawn Edward Good, who was a registered broker with Morgan Stanley it its Wilmington, North Carolina office, was recently barred by FINRA by consent agreement.  Mr. Good also has a pending SEC Complaint against him alleging the following involvement in a ponzi scheme:

  • From 2012 until 2022 Mr. Good solicited customers to transfer funds to his personal bank account, allegedly for investments in real estate and government bonds.
  • In ponzi scheme fashion, the transferred monies were used to repay earlier customers who had also invested, in addition to payment of Mr. Good’s personal expenses.

The United States Securities and Exchange Commission (SEC) has filed a Complaint charging a Broker-Dealer for the first time with a violation of the recently enacted Regulation Best Interest (Reg BI).  The subject of the Complaint was Western International Securities, and five of its registered brokers, Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan.

The Complaint alleges that Western and its brokers sold high risk and potentially illiquid L bonds issued by GWG Holdings, Inc., with many of the sales to customers on fixed incomes and with moderate risk tolerances.  The SEC’s press release alleged that the Defendants “failed to comply with Reg BI’s “Care Obligation” both because they did not exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs associated with L Bonds, and also because they recommended L Bonds to at least seven particular customers without a reasonable basis to believe the bonds were in their customers’ best interests.”

The SEC also claimed that the activities and sales violated the compliance component of Reg BI which requires firms to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

The U.S. Securities Exchange Commission charged multiple Investment Advisory Firms and Broker-Dealers with unsuitable sales of exchange traded products to their customers.

According to the SEC Press Release, the firms recommended the purchase and holding of these products, despite the fact that the products were only supposed to track the short term volatility in the market, and would likely decline if held long term.

The exchange traded funds (ETFs), attempted to track the short term volatility expectations of the market. Examples referenced in the SEC Orders were iPath S&P 500 VIX Short–Term Futures ETN (“VXX”), Velocity Shares Daily Inverse VIX Short Term ETNs linked to the S&P 500, VIX Short-Term Futures Index (“XIV”), and another volatility-linked security called the ProShares VIX Short-Term Futures ETF (“VIXY”).

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