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Federal Court Orders Husband and Wife Team and Their Company to Pay Defrauded Customers More Than $1 Million in Connection with a Futures Trading Scheme

February 11, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: CFTC, CFTC Complaint, Defrauded Customers, Federal Court, funds, Futures Trading Scheme, trading

The Commodity Futures Trading Commission (CFTC) announced today that on December 27, 2018 a Washington State federal court ordered Bellevue, Washington residents Sung Hong a/k/a Lawrence Hong or Laurence Hong, his wife, Hyun Joo Hong a/k/a/ Grace Hong, and their company Pishon Holding LLC to pay more than $1.25 million in restitution in connection with an enforcement action brought by the CFTC charging the defendants with fraudulent solicitation and misappropriation involving futures contracts. In addition to the restitution, the Court Order also imposes a permanent trading and registration ban on the Hongs and Pishon and prohibits them from violating provisions of the Commodity Exchange Act (CEA) as charged.

The Court’s Order stems from a CFTC Complaint filed on June 1, 2017 in the U.S. District Court for the Western District of Washington. [See CFTC Press Release 7569-17]. In the Order, Judge Marsha Pechman found that the Hongs and Pishon misappropriated $1,259,317.77 from their customers. Additionally, the court found that the Hongs and Pishon fraudulently solicited more than $11 million dollars from customers for the purpose of trading futures contacts. The court further found that the Hongs and Pishon lied about, about among other things how much money they had under management; Laurence Hong’s prior trading success; and how trading fees would be deducted from customer accounts. At the same time, the Court Order found, the Hongs and Pishon failed to tell customers that Laurence Hong had been imprisoned previously for 33 months in connection with wire fraud charges.

In a parallel criminal case filed in the United States District Court for the Western District of Washington, Laurence Hong and Grace Hong pleaded guilty on March 27, 2018 and March 30, 2018, respectively, to multiple criminal counts. See Case No. CR17-163TSZ. On October 11, 2018, Laurence Hong was sentenced to a 180-month prison term and Grace Hong was sentenced to a 72-month prison term. The court ordered that the defendants also pay restitution in the criminal matter. In recognition of the prior restitution award in the criminal matter, Judge Pechman ordered that the defendants may offset their civil restitution obligation with payments in the criminal matter on a one-to-one basis.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The Division of Enforcement thanks the United States Attorney for the Western District of Washington and the FBI for their invaluable assistance and cooperation.

The CFTC Division of Enforcement staff members responsible for this case are Kevin Samuel, Ilana Waxman, Kim Bruno, Alison Wilson, and Rick Glaser.

FCA Publishes Its Second Set of Rules Following Its Asset Management Market Study

February 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: asset management, asset management market, Asset Management Market Study, consumers, FCA, funds, investment, market, Rules, The Financial Conduct Authority

The Financial Conduct Authority (FCA) has published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.

The asset management industry plays an important role in the UK’s economy. Asset managers seek returns for investors by investing in a variety of assets. Over £1 trillion is managed for individual investors and £3 trillion on behalf of UK pension funds and other institutional investors. The FCA’s asset management market study presented evidence of weak price competition in many areas of the asset management industry. This means lower returns for savers, pensioners and other investors.

The FCA has acted to tackle the issues found. In April 2018, the FCA introduced new rules to ensure fund managers act as agents of investors in their funds. Today’s rules and guidance complement that work by helping consumers understand more about how their money is being managed, so that they can make better investment decisions.

The new rules and guidance:

set out how fund managers should describe fund objectives and investment policies to make them more useful to investors
require fund managers to explain why or how their funds use particular benchmarks or, if they do not use a benchmark, how investors should assess the performance of a fund
require fund managers who use benchmarks to reference them consistently across the fund’s documents
require fund managers who present a fund’s past performance to do so against each benchmark used as a constraint on portfolio construction or as a performance target, and
clarify that where a performance fee is specified in the prospectus, it must be calculated based on the scheme’s performance after the deduction of all other fees
Christopher Woolard, FCA Executive Director of Strategy and Competition

Christopher Woolard, the FCA’s Executive Director of Strategy and Competition, commented:
‘We’re working to make competition work better in the asset management market and protect those least able to actively engage with their investments. Today’s remedies build on those we’ve already introduced and will make it easier for investors to choose the best fund for them and help them achieve their investment objectives’.

There is other work ongoing as a result of the Asset Management Market Study. In late November 2018, the Cost Transparency Initiative(link is external) was launched as an independent group working to improve cost and charges transparency for institutional investors. This progressed the work already undertaken by the Institutional Disclosure Working Group. The FCA also continues to work with the Competition and Markets Authority(link is external) on their findings from their investigation into investment consultancy.

Former Adelaide Financial Adviser Pleads Guilty to theft of $4.88 Million

February 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Adelaide financial adviser, bank accounts, banking documents, Financial Planner, funds, James Gibbs, JGI, Madison Financial Group Ltd, member statements

Former Adelaide financial adviser, James Gibbs, has pleaded guilty to 28 dishonesty offences committed when he was a financial planner and director of James Gibbs Investments Pty Ltd (JGI). JGI operated in Franklin St, Adelaide.

ASIC alleged that between 20 August 2009 and 30 July 2016, Gibbs stole approximately $4.88 million of funds that he was managing for his clients. A number of clients had self-managed superannuation funds, which Gibbs was able to access via client bank accounts.

ASIC also alleged that between 25 June 2012 and 30 July 2016, Gibbs created and used false documents, including banking documents and member statements.

Gibbs appeared in the Adelaide Magistrates Court on 1 February 2019 and pleaded guilty to all offences. He was placed on bail and was remanded to appear in the committal court on 27 February 2019. He faces a maximum penalty of 10 years imprisonment for each offence committed prior to May 2012, or 15 years imprisonment for each offence committed after that time.

The Commonwealth Director of Public Prosecutions is prosecuting the matter.

Background

The alleged misconduct occurred while Mr Gibbs and JGI were authorised representatives of Madison Financial Group Ltd (AFSL 246679). ASIC became aware of the allegations as a result of a breach report by Madison.

ICE Benchmark Administration Introduces the U.S. Dollar ICE Bank Yield Index for Review and Comment by Market Participants

January 31, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Administration, Bank, funds, IBA, ICE, ICE Bank, ICE Benchmark Administration, market participants, preliminary methodology, U.S. Dollar

Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that ICE Benchmark Administration (“IBA”) has published a paper introducing the U.S. Dollar ICE Bank Yield Index for review and comment by market participants.

The fully transaction-based U.S. Dollar ICE Bank Yield Index is designed to measure the yields at which investors are willing to invest U.S. dollar funds in large, internationally active banks on a wholesale, unsecured basis over one-month, three-month and six-month periods.

The index has been developed to meet the potential needs of lenders, borrowers and other users of non-derivative or “cash” products that have historically referenced short-term interest rate benchmarks, such as LIBOR, in their contracts.

IBA has conducted a period of testing on a preliminary methodology for the index over the course of the past year. The results are published in the paper and on IBA’s website.

IBA is now inviting market participants and stakeholders to review and provide feedback on the U.S. Dollar ICE Bank Yield Index and its proposed methodology via email at IBA@theice.com by March 31, 2019.

IBA intends to consider and take account of this feedback in finalising the construction of the index before conducting a production-standard test in the second half of 2019. If the market’s response is encouraging and future testing is successful, IBA anticipates that it will launch the U.S. Dollar ICE Bank Yield Index and commence publication during the first quarter of 2020.

There is no guarantee that IBA will continue to test the U.S. Dollar ICE Bank Yield Index, be able to source data to derive the index or publish the index in the future. Users of U.S. Dollar LIBOR should not rely on the potential publication of the U.S. Dollar ICE Bank Yield Index when developing and executing transition or fallback plans.

Court Winds up CFS Private Wealth and Bans Adviser for 25 Years

January 25, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: ASIC, CFS Private Wealth, Combined Financial Solutions, Court Winds, financial services, financial years, funds, investor funds, Mr Miller

Following an ASIC investigation, the Federal Court of Australia has wound up Australian financial services Licensee CFS Private Wealth Pty Ltd and Combined Financial Solutions Pty Ltd, a corporate authorised representative of CFS Private Wealth, and restrained its director, Graeme Walter Miller, from providing financial services for 25 years. Mr Miller is also disqualified from managing corporations for three years.

Since 2008, Mr Miller advised clients of CFS Private Wealth, many of them self-managed superannuation funds, to transfer over $4.7 million to another related company, CFS Corporation Pty Ltd, apparently for investment purposes. Mr Miller instead used those funds for his own personal purposes and to make interest payments to other clients – conduct described by Justice Reeves in his judgement as a ‘blatant misuse of investor funds’.

In restraining Mr Miller from providing financial services for 25 years, Justice Reeves had regard to Mr Miller’s ‘frequent and ongoing misuse of his clients’ superannuation savings for personal purposes over a number of years, in a long series of transactions which displayed what I consider to be a serious degree of personal dishonesty’.

Justice Reeves found ‘no evidence that Mr Miller had demonstrated any remorse for, or shown any appreciation of, the disastrous effects of his wrongdoing on his erstwhile clients…[and] no evidence that Mr Miller has any prospects of reforming his behaviour’.

The Court also found that CFS Private Wealth:

failed to provide financial services efficiently, honestly and fairly, in contravention of s912A of the Corporations Act 2001;
failed to lodge its financial reports with ASIC for the 2016 and 2017 financial years;
lodged its financial reports for the 2010, 2011, 2013, 2014 and 2015 financial years after the due date;
had insufficient assets to meet the conditions of its financial services licence; and
did not adequately document client investments, including client names, amounts invested, amounts repaid (if any) and the name of the company invested in.

The Court has appointed Jamie Harris and Anthony Connelly of McGrath Nicol as liquidators of CFS Private Wealth and Combined Financial Solutions Pty Ltd.

ASIC had sought the reinstatement and winding up of a third related company, BDM Asia Pacific Pty Ltd (formerly known as CFS Corporation Pty Ltd), however the Court declined to make such orders. ASIC is reviewing the judgement in this regard.

ASIC’s investigation into Mr Miller is continuing.

Download a copy of the judgment here.

Background

On 21 May 2018, the Court made interim orders restraining Mr Miller and the corporate respondents from dealing with their assets and investor funds (see 18-132MR). Those orders have now been discharged.

Despite Spike in U.S. Corporate Bond eTrading Consolidation Ahead for Platforms

January 12, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: bond trading, e-trading volume, eTrading Consolidation, funds, Greenwich, market share, market structure, Non-Bulge Bracket Dealers, U.S. Corporate Bond

New Greenwich Associates Report Shows Non-Bulge Bracket Dealers and Other New Liquidity Providers Gaining Market Share

Tuesday, January 8, 2019 Stamford, CT USA — Despite a surge in the share of U.S. corporate bond trading volume executed electronically in 2018, Greenwich Associates says consolidation is on the way for electronic platforms.

E-trading levels jumped to 26% of total U.S. corporate bond trading volume in Q3 2018 from just 19% in Q1 2018. Even amid that growth, the landscape of in the U.S. has normalized to a large extent, with market leader MarketAxess and a handful of other large platforms capturing the bulk of e-trading volume.

Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates

“The boom in new corporate bond trading platforms is over,” says Kevin McPartland, Head of Research for Market Structure and Technology at Greenwich Associates and author of Corporate Bond Trading in 2019: Competition is Good, Complexity is Not.

On the surface, it seems there is plenty of room in this big market for a diverse set of competitors facing challenges across investment grade, high yield, block trades, micro-lots, dealers, asset managers, principal trading firms, etc. But history shows that while market participants like choice and competition, they dislike the complexity that comes with integrating countless liquidity and data sources.

“All of this points to more mergers and acquisitions among the platforms over the next 18 months,” says Kevin McPartland.

Investors Turn to Regional Dealers and Other New Sources of Liquidity

When it comes to choosing dealers for trade execution, institutional investors still send 56% of their bond trades through the top five dealers. Rather than consolidating their trading volume, however, they are spreading it out by sending more business to middle-market and regional dealers who have stepped in to pick up the slack as bulge-bracket dealers refocused their businesses on sectors and clients that provide the best ROI. Non-bulge-bracket dealers now account for one-quarter of client trading, up from 14% in 2013.

Investors are also taking advantage of new liquidity sources. For example, the profit opportunity presented by fixed-income ETF arbitrage strategies has brought a number of principal trading firms and some quantitative hedge funds into the corporate bond market.

“Institutional corporate bond investors have voted with their feet, utilizing those tools that work best within the current market structure,” says McPartland.

Dishonesty Charges Laid Against Former Sydney Financial Adviser

December 20, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: AFS, ASIC, Australian financial services licensee, business, financial services, funds, investigation, Sydney, Wealth Achievers

Former Sydney financial adviser, Mr Daniel McSweeny, has been charged with 20 dishonesty offences alleged to have been committed when he was a company director. McSweeny ran financial services business, Wealth Achievers, with offices in Parramatta and Mosman.

McSweeny appeared in the Downing Centre Local Court in Sydney today.

During the relevant period, McSweeny was sole director of two trustee companies, Constantia Capital Pty Ltd and Prettoria Capital Pty Ltd (both in liquidation), which each held a bank account into which his clients’ funds, mostly superannuation savings, were transferred. ASIC alleges that between 28 March 2011 and 24 December 2012, McSweeny dishonestly transferred or directed others to transfer funds from those bank accounts for the benefit of himself or others.

ASIC also alleges that between 21 and 29 May 2012, McSweeny directed an employee to construct a back-dated Statement of Advice which was given to an Australian financial services licensee, A.C.N 055 796 211 Limited (in liquidation) (formerly AFS Group Ltd) (AFS Group), in answer to an investigation it was conducting following a complaint by one of McSweeny’s clients.

The matter was adjourned for further mention on 12 March 2019 at the Downing Centre Local Court.

The Commonwealth Director of Public Prosecutions is prosecuting the matter.

Background

The alleged misconduct occurred while either Mr McSweeny or his company, FF & I Holdings (in liquidation), were authorised representatives of AFS Group (AFSL No 259586).

Mark Starling Sentenced to 5 Years’ Imprisonment in FCA Prosecution of £3m Investment Fraud

December 2, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: FCA, FCA Prosecution, funds, investment fraud, investment monies, investment schemes, Mark Starling, Money

Mark Barry Starling, aged 57 of Farnham, Surrey, was today sentenced at Southwark Crown Court to 5 years’ imprisonment for defrauding investors of just under £3 million in relation to unauthorised investment schemes he operated between 2008 and 2017.

Over a period of 9 years between 2008 and 2017, Mr Starling purported to run investment funds and obtained investment monies from his friends and acquaintances. They entrusted him with just under £3 million of their money.

In sentencing, HHJ Bartle QC said that Mr Starling had defrauded investors in an ‘appalling way’. The Judge said that ‘not one word of what [Mr Starling told investors] was true’ and that he had consistently told his victims ‘a pack of lies’.

Mr Starling claimed to be running three funds, the ‘Pilot Dax Fund’, the ‘Shadow Dax Fund’ and the ‘Pilot Eurostoxx Fund’, and described himself as a ‘proprietary futures trader’. It seems he did have an interest in these markets, but little more than that. He traded just £8,000 of the £3 million invested with him, on which he made a loss of £2,450, yet managed to spend over £1 million maintaining his own lifestyle.

Mr Starling would sometimes pay money back to his investors on request to sustain the illusion of running a successful investment business. However, the reality was that these payments were just funded from other victims’ investment monies.

In order to cover up his deception and prolong the fraud, Mr Starling resorted to forging documents and correspondence purporting to be from brokerages, and bank statements. He also registered web domain names and created email addresses in names similar to a legitimate brokerage, and for an entirely fictitious brokerage. The Judge said that the forgeries were ‘sophisticated’ and the whole scheme demonstrated the way that Mr Starling had ‘abused a position of trust’.

Mr Starling was never authorised by the FCA to carry out any regulated activity.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

‘Mr Starling was never authorised to carry on business as an investment manager or as a futures trader. His sophisticated and dishonest masquerade has caused substantial losses to innocent investors. The FCA is committed to ensuring that criminals who operate unauthorised investment schemes are brought to justice and our quick action here has prevented the losses from becoming much worse.’

In total, some 24 investors are known to have put money into the funds, of whom 17 lost a total of around £1.8 million. At the hearing, the FCA commenced confiscation proceedings against Mr Starling, and it is expected that the victims will get some limited compensation from funds restrained by the FCA in April 2017.

Mr Starling received a sentence of 5 years imprisonment for an offence of Fraud by False Representation under Section 1 of the Fraud Act 2006 and a concurrent sentence of 12 months imprisonment for Breach of the General Prohibition under S19 of the Financial Services and Markets Act 2000 in that he operated a collective investment scheme without being FCA authorised or exempt. This makes a total sentence of 5 years.

Federal Court Orders Husband and Wife Team and Their Company to Pay Defrauded Customers More Than $1 Million in Connection with a Futures Trading Scheme

FCA Publishes Its Second Set of Rules Following Its Asset Management Market Study

Former Adelaide Financial Adviser Pleads Guilty to theft of $4.88 Million

Background

ICE Benchmark Administration Introduces the U.S. Dollar ICE Bank Yield Index for Review and Comment by Market Participants

Court Winds up CFS Private Wealth and Bans Adviser for 25 Years

Background

Dishonesty Charges Laid Against Former Sydney Financial Adviser

Background

Mark Starling Sentenced to 5 Years’ Imprisonment in FCA Prosecution of £3m Investment Fraud

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