Among recent enforcement actions by FINRA were a fine and sanction against a firm and individual over compliance and supervision issues; against another firm for supervisory failures; and against another for overstating its advertised trade volume.
In addition, the SEC charged a hedge fund firm and a senior research analyst over failure to prevent insider trading and obtained a settlement from another company over a stock picking game.
Company Charged by SEC in Stock Picking Cellphone Game
New York-based Forcerank LLC has been charged by the SEC, or Securities and Exchange Commission, with illegally offering complex derivatives products to retail investors through mobile phone games that were described as "fantasy sports for stocks."
According to the agency, an SEC investigation found that Forcerank failed to file a registration statement for what constituted a security-based swap offering, and the company also failed to sell the contracts through a national securities exchange.
Forcerank ran mobile phone games where players predicted the order in which 10 securities would perform relative to each other. Players won points and some received cash prizes based on the accuracy of their predictions. Forcerank kept 10% of the entry fees and obtained a data set about market expectations that it hoped to sell to hedge funds and other investors. Forcerank's agreements with players were security-based swaps because they provided for a payment that was dependent on an event associated with a potential financial, economic, or commercial consequence and based on the value of individual securities.
Without admitting or denying the charges, the company agreed to the SEC's sanctions and to pay a $50,000 penalty.
Hedge Fund Firm, Supervisor Charged by SEC
San Francisco-based Artis Capital Management and senior research analyst Michael Harden have agreed to settle with the SEC over charges related to their failures to detect insider trading by one of their employees.
According to the agency, Artis Capital Management failed to prevent insider trading at the firm, while Artis Capital and Harden, the employee's supervisor, failed to respond appropriately to red flags that should have alerted them to the misconduct.
The employee, Matthew Teeple, was later charged, along with his source David Riley; Teeple and Riley also were charged by criminal authorities and have since received prison sentences.
Without admitting or denying the charges, Artis Capital agreed to settle by disgorging the illicit trading profits that Teeple generated for the firm totaling $5,165,862, plus interest of $1,129,222 and a penalty of $2,582,931, while Harden agreed to pay a $130,000 penalty and is suspended from the securities industry for 12 months.
FINRA Fines Firm, Suspends Individual
FINRA, or Financial Industry Regulatory Authority, has censured Robert W. Baird & Co. Incorporated and fined the firm $200,000, and suspended Rolf Parker Griffith III and fined him $5,000, after it said that they did not reasonably supervise a former registered representative's misuse of customer funds.
According to the agency, Griffith, who was the registered representative's direct supervisor, did not reasonably follow up on red flags associated with a trade correction request submitted by the registered representative that should have alerted him to the misuse of customer funds.
