SEC, FINRA Enforcement Roundup: 31 NFL Players Bilked by Broker’s Casino Deal

Deutsche Bank Securities was censured and fined $175,000 by FINRA and ordered to pay restitution of $10,314.44, plus interest, to clients, on findings that it sold corporate bonds to those clients without setting a fair price for those bonds. The firm has neither admitted nor denied the findings, but has accepted the sanctions.

In addition, FINRA also found that sale reports included incorrect short interest positions, failures to designate price differences when sales were based on prior times than the current market, incorrect execution times and failures to designate transactions that used weighted prices, among other deficiencies. The firm also failed to repair many rejected submissions to OATS and failed to highlight those that were repaired when they were resubmitted.

FINRA Fines, Censures KBC Securities on Reporting Failures, Short Sales

KBC Securities USA, formerly known as KBC Financial Products USA, faced a fine of $157,500 and FINRA censure over short sales and failures in reporting. The firm neither admitted nor denied FINRA findings that it failed to transmit last sale reports of transactions in consolidated quotation system (CQS) securities and NMS securities to the FNTRF within 90 seconds after execution, and that it failed to mark some of those reports as late. The firm was also cited on failures involving TRACE-eligible securities and supervisory failures, as well as for executing short sales on more than 450,000 shares for its proprietary account in the securities of financial firms covered by the SEC 2008 Emergency Order, and the firm was not otherwise entitled to the market maker exemption to the Emergency Order. The firm also failed to mark short sales as short and accepted short-order sales in equities from another person, or for its own account, without borrowing the security, making a bona fide arrangement to borrow it, or having reasonable grounds to believe that it could be borrowed for delivery on the date due.

China-Based Company, CFO to Pay More Than $1 Million in Combined Settlement

Keyuan Petrochemicals and its former CFO, South Carolina-based Aichun Li, have agreed to pay more than $1 million combined to settle SEC charges of accounting and disclosure violations. Keyuan, which was formed through a reverse merger in April 2010, was charged with systematically withholding information from shareholders on numerous related party transactions between May 2010 and January 2011, and also on a secret off-balance sheet cash account used for illicit purposes.

The unreported transactions, which involved Keyuan's CEO, controlling shareholders of the company, and entities that were controlled by management or its family members, spanned everything from sales of products and purchases of raw materials to loan guarantees and short-term financing.

The secret account paid for cash bonuses to senior officers, travel and entertainment expenses and an apartment rental for the CEO, and cash and noncash gifts to Chinese government officials; it also meant that the company misstated in its financial statements cash, receivables, construction-in-progress, interest income, other income, and general and administrative expenses.

Li's part in all this was to sign off on the company's registration statements and quarterly reports, despite all the unreported goings-on. She simply ignored the red flags and information about the transactions although she was hired to ensure the company's compliance with U.S. accounting and financial reporting regulations.

In addition to accepting other penalties, Keyuan agreed to pay $1 million and Li to pay $25,000 in settling the SEC's charges; the settlement must be approved by the court. Neither one admits nor denies the charges, and the investigation is continuing.

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