SEC VS. CORMARK SECURITIES INC.,
21 December 2020
These proceedings concern Cormark’s role in repeatedly causing a U.S. executing broker (the “Executing Broker”) to violate the order-marking and locate requirements of Regulation SHO of the Exchange Act.
From August 2016 to October 2017 (the “relevant period”), Cormark entered more than 200 sale orders for a hedge fund customer (the “Hedge Fund”) into an intermediary broker’s execution management system as “long” orders.2 At the time these orders were entered, the Hedge Fund was not “deemed to own” the stock being sold and did not have a net long position in the stock. Thus, the orders should have been marked as “short” sales under Regulation SHO. The intermediary broker, ITG Canada Corp. (“ITG Canada”), routed the sale orders, with the incorrect order-marking information provided by Cormark, to the Executing Broker, which in turn executed the orders as “long” sales on U.S. exchanges. As a result, Cormark caused the Executing Broker to mismark sale orders as “long,” in violation of Rule 200(g) of Regulation SHO.
PDF (8 pages): SEC VS. CORMARK SECURITIES INC.,
CFTC v Morgan Stanley
CFTC, 30 September 2019
The Commodity Futures Trading Commission (“Commission”) has reason to believe that during the period from in or about November 2013 to at least November 2014 (“Relevant Period”), Morgan Stanley Capital Group Inc., (“Morgan Stanley” or “Respondent”) violated Section 4c(a)(5)(C) of the Commodity Exchange Act (the “Act”), 7 U.S.C. § 6c(a)(5)(C) (2012). Therefore, the Commission deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted to determine whether Respondent engaged in the violations set forth herein and to determine whether any order should be issued imposing remedial sanctions.
PDF (7 pages): CFTC v Morgan Stanley
Gamma vs Merrill Lynch, Morgan Stanley
CourtListener, 27 June 2019
This action arises from Defendants’ unlawful and intentional manipulation of COMEX Gold Futures, COMEX Silver Futures, NYMEX Platinum Futures, and NYMEX Palladium Futures contracts, and options on those futures contracts (collectively, “precious metals futures contracts”) traded on the New York Mercantile Exchange (“NYMEX”) and the Commodity Exchange, Inc. (“COMEX”) from approximately January 1, 2008 through December 31, 2014 (the “Class Period”) in violation of the Commodity Exchange Act, 7 U.S.C. §§ 1, et seq. (the “CEA”) and the common law.
PDF (29 pages): Gamma vs Merrill Lynch, Morgan Stanley
SEC v Merrill Lynch
23 June 2016
Broker-dealers are required to be diligent stewards of the cash and securities entrusted to them by their customers. This basic principle is embodied in Exchange Act Rule 15c3-3, known as the Customer Protection Rule (“Rule”). The Rule requires broker-dealers to safeguard both the cash and securities of their customers so that customer assets can be quickly returned if the firm fails. In broad strokes, a broker-dealer cannot use customer assets to finance the business activities of the firm, and it cannot place customer assets in locations or accounts that make them vulnerable to claims made against the broker-dealer by third parties.
PDF (23 pages): SEC v Merrill Lynch
SEC v Schwab
19 January 2016
A Charles Schwab Corp subsidiary and a former customer told the U.S. Securities and Exchange Commission Friday that an agency judge overreached when she found them liable for an alleged naked short-selling scheme and ordered them to pay $8.2 million in sanctions.
PDF (3 pages): SEC v Schwab
SEC v Goldman Sachs
14 January 2016
These proceedings arise out of practices engaged in by Goldman’s Securities Lending Demand Team (the “Demand Team”), between November 2008 and mid-2013, in providing and documenting “locates” to enable its customers to execute short sales.
PDF (8 pages): SEC v Goldman Sachs
SEC v Merrill Lynch
1 June 2015
These proceedings concern Merrill’s violations of Regulation SHO (Reg SHO”) of the Exchange Act, in connection with its practices relating to its execution of short sales. As described more fully below, the violations arose from two separate issues concerning Merrill’s use of its “easy to borrow” lists.
PDF (11 pages): SEC v Merrill Lynch
FINRA v Morgan Stanley
13 May 2015
Based on the foregoing reviews, the staff determined that the firm violated FINRA Rule 4560, NASD Rule 3360, NYSE Rule 421, FINRA Rule 2010, NASD Rule 2110, NASD Rule 3010, and SEC Rule 200(1). Specifically, the staff determined the firm failed to submit accurate short interest reports during certain short interest reporting periods and failed to provide a supervisory system reasonably designed to achieve compliance with short interest reporting requirements.
PDF (10 pages): FINRA v Morgan Stanley
Overstock.com v Goldman Sachs & Co
13 November 2014
Often, it is the federal courts, applying federal law, that wrestle with claims of cross-state securities fraud involving a nationally-listed stock. Here, plaintiffs of various states allege defendants, securities firms headquartered on the East Coast, violated California and New Jersey law through their involvement in massive naked short selling of Overstock shares. The trial court sustained demurrers to plaintiffs’ New Jersey Racketeer Influence and Corrupt Organizations (RICO) claim without leave to amend and subsequently granted summary judgment on plaintiffs’ California market manipulation claims.
PDF (61 pages): Overstock.com v Goldman Sachs & Co
FINRA v Merrill Lynch
27 October 2014
Between approximately July 1, 2008 through July 2012, MLPRO failed to establish, maintain and enforce adequate supervisory systems and procedures, including in some instances written supervisory procedures, that were reasonably designed to ensure compliance with applicable securities laws and regulations including Regulation SHO, the 2008 Emergency Orders issued by the SEC and anti-money laundering requirements.
PDF (20 pages): FINRA v Merrill Lynch
Anschutz Corp. v. Merrill Lynch & Co., Inc., 11-1305
FindLaw, 14 August 2012
In a suit against Merrill Lynch and others, claiming market manipulation, fraud, control person liability, and negligent misrepresentation, district court’s judgment in favor of the defendants is affirmed where: 1) the market manipulation claims fail for the same reasons identified in Wilson v. Merrill Lynch & Co., which held that the same website disclosure at issue in this case contained sufficient information about Merrill Lynch’s support bidding practices to preclude a market manipulation claim; 2) district court properly dismissed the California Corporations Code claims as plaintiff fails to allege any injury or unlawful conduct in California; and 3) district court properly dismissed the negligent misrepresentation claims against the Rating Agency defendants as plaintiff fails to allege an actionable misrepresentation under New York law.
Read full filing.
FINRA v Credit Suisse
13 December 2011
Pursuant to FINRA Rule 9216 of FINRA’s Code of Procedure, the Respondent submits this Letter of Acceptance, Waiver and Consent (“AWC”) for the purpose of proposing a settlement of the alleged rule violations described below. This AWC is submitted on the condition that, if accepted, FINRA will not bring any future actions against the Respondent alleging violations based on the same factual findings described herein.
PDF (22 pages): FINRA v Credit Suisse
SEC v Citigroup
28 November 2011
On October 19, 2011, the U.S. Securities and Exchange Commission
(the “S.E.C.”) filed this lawsuit, accusing defendant Citigroup
Global Markets Inc. (“Citigroup”) of a substantial securities fraud.
According to the S.E.C.’s Complaint, after Citigroup realized in
early 2007 that the market for mortgage-backed securities was
beginning to weaken, Citigroup created a billion-dollar Fund (known
as “Class V Funding III”) that allowed it to dump some dubious assets
on misinformed investors.
PDF (15 pages): SEC v Citigroup
FINRA v UBS
24 October 2011
As set forth below, the Firm failed to comply with certain requirements of Reg SHO, FINRA Rules, NASD Rules and federal securities laws during the period covering, in whole or in part, January 3, 2005 through March 2010, with several violations continuing through December 31, 2010 (the “Relevant Period”), The Firm’s violations existed for various periods of time throughout the Relevant Period and are summarized below.
PDF (26 pages): FINRA v UBS
SEC v Goldman Sachs Execution & Clearing, L.P.
4 May 2010
These proceedings relate to GSEC’s response to the Commission’s September 17, 2008 emergency order enacting temporary Rule 204T to Regulation SHO (“Rule 204T” or the “Rule”). That Rule was an important part of the Commission’s response to concerns about the effects of “naked” short selling upon securities prices.
PDF (8 pages): SEC v Goldman Sachs Execution & Clearing, L.P.