In the Matter of Prime Capital Services, Inc., Gilman Ciocia, Inc., Michael P. Ryan, Rose M. Rudden, Christie A. Andersen, Eric J. Brown, Matthew J. Collins, Kevin J. Walsh and Mark W. Wells
On June 30 the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Section 15(b) and 21C of the Securities Exchange Act of 1934, and Section 203(f) of the Investment Advisers Act of 1940 (Order) against Prime Capital Services, Inc., Gilman Ciocia, Inc., Michael P. Ryan, Rose M. Rudden, Christie A. Andersen, Eric J. Brown, Matthew J. Collins, Kevin J. Walsh and Mark W. Wells.
In the Order, the Division of Enforcement (Division) alleges that from 1999 through 2007, Prime Capital Services, Inc., a broker-dealer registered with the Commission, and its associated registered representatives, Eric J. Brown, Kevin J. Walsh and Mark W. Wells, offered and sold variable annuities to senior citizens in south Florida by means of material misrepresentations and omissions. The Division alleges that many of the variable annuities sold were unsuitable investments for their elderly customers due to the customers' ages, liquidity and investment objectives. The Division also alleges that Prime Capital Services' parent company, Gilman Ciocia, Inc., aided and abetted the broker-dealer's fraud by arranging free-lunch seminars in and around Boca Raton, Delray Beach, Boynton Beach and Melbourne at which the Prime Capital Services registered representatives recruited elderly customers whom they later induced to buy variable annuities.
The Division further alleges that Prime Capital Services and its president, Michael P. Ryan, failed to implement the firm's supervisory procedures in a way that reasonably could be expected to detect and prevent the registered representatives' violations of the federal securities laws. Additionally, the Division alleges that Ryan, chief compliance officer Rose M. Rudden, and supervisors Matthew J. Collins and Christie A. Andersen failed reasonably to supervise Brown, Walsh and/or Wells with a view toward detecting and preventing their violations of the federal securities laws.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the respondents an opportunity to respond to these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. As directed by the Commission, an administrative law judge shall issue an initial decision in this matter no later than 300 days from the date of service of the Order Instituting Proceedings. (Rels. 33-9047; 34-60190; IA-2898; File No. 3-13532)
Judgment of Permanent Injunction Entered Against Unregistered Broker-Dealer and Defaulted Defendant Indicted by a Federal Grand Jury
The Securities and Exchange Commission announced that a judgment of permanent injunction has been entered against an unregistered broker-dealer, Finbar Securities Corp., a suspended California corporation formerly based in West Covina, California, and the default of Finbar's former president, Robert Tringham, 63, formerly of Diamond Bar, California, has been entered.
On June 12, 2009, the United States District Court in Los Angeles entered a judgment of permanent injunction and other relief against Finbar pursuant to the consent of the Court-appointed permanent receiver, Robb Evans & Associates LLC. The judgment enjoins Finbar from violating the antifraud and the broker-dealer registration provisions of the federal securities laws, and specifies that funds and assets of the receivership estate, if any, will be distributed to investors less court-approved fees and expenses pursuant to a plan of distribution that may be submitted by the receiver. On May 21, 2009, the Court clerk entered Tringham's default for failing to respond to the Commission's complaint.
The Commission's complaint, filed on April 3, alleges that Tringham and Finbar fraudulently raised at least $6.4 million from investors in the U.S. and abroad, and falsely represented that Finbar was "a licensed Securities Dealer" and engaged in other fraudulent conduct. The complaint alleges Tringham told investors Finbar sold debt instruments and high yield risk-free investment opportunities, and that Finbar had not been registered with the Commission and that Tringham had not been associated with any registered broker or dealer. The Commission obtained a temporary restraining order and other emergency relief on April 3, and a preliminary injunction and an order appointing a permanent receiver on April 13.
In addition to the relief already obtained, the Commission seeks a permanent injunction, disgorgement, and civil penalties against Tringham, and disgorgement and civil penalties against Finbar. Administration of the receivership estate will continue.
Separately, Tringham was indicted by a federal grand jury in Los Angeles on May 20, 2009 for conduct unrelated to Finbar in United States of America v. Robert Tringham, United States District Court for the Central District of California, Case No. CR0900490.
For further information, see Litigation Release Nos. 20991 (April 7, 2009) and 21027 (May 7, 2009). [SEC v. Finbar Securities Corp., et al., United States District Court for the Central District of California, Case No. CV 09-2325 ODW] (LR-21109)
Former Executive of Putnam Fiduciary Trust Company Settles Fraud Action Brought by SEC
The Securities and Exchange Commission announced that on June 29, 2009, the United States District Court for the District of Massachusetts entered a final judgment by consent imposing a permanent injunction, civil penalty, and other relief against a former executive of transfer agent Putnam Fiduciary Trust Company (PFTC) in a case filed by the Commission in December 2005. The Complaint alleged that the defendants engaged in a scheme beginning in January 2001 by which they and other executives of PFTC defrauded a defined contribution plan client and group of mutual funds of approximately $4 million. Donald F. McCracken, of Naples, Maine, a former senior managing director and head of fund accounting at PFTC consented to imposition of the final judgment without admitting or denying the allegations of the Commission's Complaint. The Court issued an order of permanent injunction against McCracken against future violations of Section 17(a)(3) of the Securities Act of 1993 and imposed a civil money penalty of $35,000. McCracken also agreed to an order barring him from association with any broker or dealer and transfer agent with the right to reapply for association after one year, which order will be imposed in a separate administrative proceeding. As part of the settlement, the Commission also agreed to dismiss certain other charges against McCracken. [SEC v. Karnig H. Durgarian, Jr., et al., Civil Action No. 05-12618-NMG, USDC, D Mass.] (LR-21110)
Court Enters Judgment of Permanent Injunction Against Defendant Ricardo H. Goldman
The Securities and Exchange Commission announced that on Oct. 23, 2008, the United States District Court for the Southern District of Florida entered a Judgment against Defendant Ricardo H. Goldman. The Judgment, entered by consent, enjoins Goldman from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b), 15(a)(1) and Rule 10b-5 of the Securities Exchange Act of 1934. The Judgment also provides for disgorgement and civil penalty, if appropriate, which shall be determined by the Court upon motion by the Commission.
The Commission began this action by filing its complaint against Goldman on Sept. 25, 2008, alleging, among other things, that Goldman solicited traders to invest approximately $2.1 million in a day trading operation he ran through his company, E Trade Fund LLC. Goldman provided securities day trading capability to E-Trade Fund's more than 110 traders and permitted them to day trade securities in E Trade Fund's own brokerage account at a registered broker-dealer through sub-accounts Goldman created for each trader.
E Trade Fund is not affiliated with E*TRADE Financial Corporation, the broker-dealer that is registered with the Commission. [SEC v. Ricardo H. Goldman, Case No. 08-22666-CIV-LENARD/GARBER (S.D. Fla.)] (LR-21111)
Judgment Entered Against Defendant Don Warner Reinhard
The Securities and Exchange Commission announced that on Dec. 9, 2008, the United States District Court for the Northern District of Florida entered a Judgment against Defendant Don Warner Reinhard ordering him to pay disgorgement in the amount of $5,857,241.09, together with prejudgment interest of $2,258,940.58 and imposing a civil penalty of $120,000. Previously, on Oct. 3, 2008, the Court entered a Judgment of Permanent Injunction and Other Relief against Reinhard, which permanently enjoined him from (i) violations of Section 17(a) of the Securities Act of 1933; (ii) violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (iii) violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (Advisers Act); (iv) aiding and abetting violations of Section 206(4) of the Advisers Act and Rule 206(4)-4(a)(2) thereunder; (v) aiding and abetting violations of Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder; and (vi) violations of Section 207 of the Advisers Act.
The Commission began this action by filing its complaint against Reinhard on Dec. 13, 2007. The complaint alleged that Reinhard, through his wholly owned investment adviser, Magnolia Capital Advisors, Inc., made false and misleading statements and omissions of material fact to his clients in connection with the offer and sale of collateralized mortgage obligations (CMOs). Specifically, Reinhard misrepresented the safety of principal in the highly leveraged CMOs he purchased for his clients' accounts and the account of Magnolia Capital Partners, L.P., a hedge fund he controlled as the general partner. [SEC v. Don Warner Reinhard, Case No. 4:07-cv-00529-RH-WCS (N.D. Fla.)] (LR-21112)
INVESTMENT COMPANY ACT RELEASES
Separate Account VA-2NLNY of Transamerica Financial Life Insurance Company
An order has been issued pursuant to Section 8(f) of the Investment Company Act declaring that Separate Account VA-2NLNY of Transamerica Financial Life Insurance Company has ceased to be an investment company. (Rel. IC-28801 - June 25)
Separate Account VA-2NL of Transamerica Occidental Life Insurance Company
An order has been issued pursuant to Section 8(f) of the Investment Company Act declaring that Separate Account VA-2NL of Transamerica Occidental Life Insurance Company has ceased to be an investment company. (Rel. IC-28802 - June 25)
Proposed Rule Changes
The Commission issued a notice of a proposed rule change (SR-FINRA-2009-040), filed by the Financial Industry Regulatory Authority to adopt FINRA Rule 2380 to limit the leverage ratio offered by broker-dealers for certain forex transactions. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60172)
The Chicago Board Options Exchange has filed a proposed rule change, as modified by Amendment Nos. 1 and 2 (SR-CBOE-2009-037), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 to amend its Minor Rule Violation Plan. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60177)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the NASDAQ OMX BX (SR-BX-2009-030) to extend the current pilot program for linkage fees on the Boston Options Exchange Facility has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60174)
A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-36) relating to linkage fees has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60175)
A proposed rule change filed by NYSE Amex to extend through September 30, 2009 its waiver of Registered Representative fees for New York Stock Exchange member organizations (SR-NYSEAmex-2009-30) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60176)
A proposed rule change filed by the NASDAQ Stock Market to provide an optional anti-internalization functionality (SR-NASDAQ-2009-057) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of June 29. (Rel. 34-60182)
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