Texas-Based Brokerage Firm Accused of Inadequate Supervision Involving VA Exchanges
The Financial Industry Regulatory Authority is ordering IMS Securities Inc. to pay a $100K fine. The Texas-based brokerage firm is accused of failures related to its monitoring of variable annuity exchanges. By settling, however, it is not denying or admitting to the allegations.According to the self-regulatory authority, the firm exhibited inadequate supervisory procedures for “problematic rates of exchange” in transactions involving variable annuities. FINRA claims that from 7/ 15/13 through 7/8/14, IMS Securities depended on its CFO to review annuity exchanges but did not provide tools or guidance to help look for “problematic rates of exchange.” The broker-dealer is accused of not probing possibly “problematic patterns” of VA exchanges and not enforcing written supervisory procedures related to consolidated reports.Texas Regulator Suspends Broker from Making Alternative Investment RecommendationsThe Texas State Securities Board has banned broker Mickey Long from recommending or selling alternative investments, including nontraded real estate investment trusts. He is suspended for 45 days. After that, his firm, Calton Associates, will have him on heightened supervision for two years.The Texas Regulator said that Long recommended certain private offerings of interest in gas and oil entities, as well as nontraded REITS to a client. Even though that client had chosen to have no more than 20% of its account allocated to financial instruments that were the “highest risk/aggressive in terms of risk tolerance level, as well as no more than 60% to instruments that had the “highest risk/moderate risk” level, Long purportedly placed almost 36% of the assets invested by the client into the first category and 78% into the second one. Long’s central registration depository file said that he had no “reasonable basis” for thinking that these recommendations were suitable for certain clients because they were beyond the risk tolerance concentration levels identified as suitable for them. Previous to working for Calton & Associates, Long was with Cetera Financial Group-owned VSR Financial Services Inc.Sam Wyly Settles Federal Fraud Charges for $198.1MSam Wyly, a former Texas billionaire who has declared bankruptcy, will pay $198.1M to settle federal securities regulator claims accusing him of securities fraud to conceal trades in companies that were under his control through the use of offshore trusts. A federal bankruptcy judge in Dallas and the Securities and Exchange Commission commissioners must still approve the settlement.Also part of the agreement, Wyle and his family must take action so that offshore trusts in the Isle of Man will issue payments to satisfy the judgment that the SEC obtained last year against him and his now-deceased brother Charles Wyly. Meantime, the regulator will make sure that the 81-year-old gets a credit against his almost $181M of federal income tax liabilities.The SEC, in its securities fraud lawsuit that it brought in 2010, accused the brothers of making $553M in undisclosed profits when it traded in companies under their control by using the offshores trusts. Both said they did nothing wrong. However, in 2014 a jury found Sam and Charles’s estate liable. Sam was ordered to pay $198.1M while Charles’s estate was told to pay $101M.Meantime, the Internal Revenue Service took the brothers to bankruptcy court. This year, a judge at the United States Bankruptcy Court in Dallas found Sam liable and told him to pay $1.11B in back taxes, interest, plus penalties. The conclusion of that case is still under negotiation.
Texas advisor suspended for doubling clients’ risky assets, FA-Mag.com, October 6, 2016
Sam Wyly, the Bankrupt Billionaire, Settles with the SEC for $198M, Dallas Observer, October 4, 2016