by T. GormanPosted on Posted in SECActions

The enforcement cases typically highlighted in this space tend to focus on what went wrong with a transaction, not how to invest. In contrast, the Commission does have an Office of Investor Education that focuses on the role of investing to help build a financial future. That Office has been highlighted this month since April has been designated as National Financial Literacy Month.

The Investor Education Office is, in some senses, the positive side of the agency, focusing on educating the public about the efforts of the Commission to aid investors to properly invest their money to hopefully build a positive future. A good example of the work done by this Office is the Ten Building Blocks to Building Wealth, published by the agency and its Director, Lori Schock. Those principles are part of a larger program to educate investors on the way to properly invest their funds to build a solid future. Those principles can be summarized as follows:

Start early: The point is to begin as soon as possible to create savings and a plan that fits your goals for the future;

Use free tools: At Investor.gov the Office publishes materials to help investors start and continue to invest properly without charge;

Create a savings/investing plan: There are an abundance of resources available at little to no cost to help get a start and continue building a financial future. While Investor.gov is a great source of information, it is only one of several.

Pay off high interest debts: A key part of the plan is to eliminate high interest debt to the extent possible and focus on sources of capital other than items such as high interest loans.

Investigate the background of professions: It is essential to inquire about the background of any professionals assisting with the development of the plan. Stated differently, any advice offered should be investigated prior to acceptance.

Research: All investments should be investigated before committing funds. Unsolicited advice should be carefully evaluated before being accepted.

Invest regularly: It is essential to invest regularly using a long-term plan. This helps build wealth.

Retirement plans: Invest in a retirement plan sponsored by your employer and take advantage of any matching funds offered. You can also use other opportunities.

Scams: It is essential to avoid scams and unsolicited advice. Investor alerts from the Commission and similar sources can aid in this endeavor.

FOMO: Finally, it is essential to select proper investments. This typically translates to skipping FOMO or “fear of missing out.” It is not necessary to invest in the latest trend. Rather, the key is good, solid investments.

Adherence to the Commission’s building blocks as listed above can aid building a long term and profitable plan. The Commission’s presentation of these points should be carefully reviewed. They are available here.

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by T. GormanPosted on Posted in SECActions

The Commission filed two new enforcement actions last week. One focused on AML compliance. The other centered on an offering fraud action.

Be careful, be safe this week.

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the Commission filed one new civil injunctive action and one new administrative proceeding.

Compliance: In the Matter of Velox Clearing, LLC, Adm. Proc. File No. 3-22469 (April 4, 2025) is a proceeding with names the firm as a Respondent, a Commission registered broker-dealer. During the period July 2019 through December 2022. Respondent maintained omnibus accounts for four Hong Kong based foreign correspondents. Those firms were registered with the Hong Kong securities regulator but not the Commission. One of those firms was an affiliate of Respondent. During the period Velox did not maintain adequate money laundering policies and procedures. This failure resulted in the firm not investigating at least 218 red flags for possible money laundering. Those instances involved situations where: a) there was reason to suspect that there may have been money laundering; b) where a firm may have had reason to believe that the evasion of detection of such activities may have occurred; c) situations in which the business being conducted had no reasonable basis; or d) in which there may have been broker-dealer assisted criminal activity. The Order alleges violations of Exchange Act Section 17(a) and Rule 17a-8. Respondent has agreed to retain an acceptable compliance expert and adopt the recommendations made. To resolve the proceedings Respondent consented to the entry of a cease-and-desist order based on the Section and Rule cited above. In addition, Respondent agreed to pay a penalty of $500,000

Offering fraud: SEC v. Miller, Civil Action No. 1:25-cv-02702 (S.D.N.Y. Filed April 1, 2025).

Named as defendants are: Randall J. Miller, founder, Chairman and Managing Member of Sports USA and the founder of Legacy Cares; Chad J. Miller, son of Randy Miller and CEO of Sports USA; and Jeffrey De Laveaga, COO of Sports USA. Related entities include Legacy Cares, Inc, a firm organized by Randy Miller to develop and own sports and family entertainment facilities based in Mesa Arizona; Legacy Sports USA, LLC, the manager of the Sports Complex; and Arizona Industrial Development Authority, a political subdivision of Arizona that served as a conduit issuer for the bonds issued in 2020 and 2021. The action centers on the issuance of about $284 million in municipal bonds by Legacy Cares through an Arizona agency known as a “conduit issuer” that manages municipal bonds. Here those bonds were for a Sports Complex. The bonds for the Sports Complex were issued in 2020 and 2021. The cash to repay the bonds was supposed to be generated by revenue from the Sports Complex, opened in 2022 using the revenue from the sale of the bonds. The memorandum used in connection with the bond offering was based on projected revenue. Those projections represented that the revenue to repay bond purchasers would be generated by the operations of the complex. The projections were based, according to the offering memoranda, on “letters of intent” attached to the Memoranda which were supposedly written by various sports clubs, leagues an others. The majority of the 50 letters attached to the Memorandum were either fabricated or materially altered in some fashion such as forged signatures. The Memo also included what were called “pre-contracts.” These items, similar to the “letters of intent,” were supposedly binding contracts evidencing arrangements with Sports USA to use the venue being built. These items were listed in the Offering Memorandum and available in a data room. The letters were fraudulent. When the complex opened it generated far less than the amount of revenue projected necessary to actually finance the operations of the venue. By May 2023, the venue filed for bankruptcy. According to the filings, less than $2.5 million of the $284 million invested was recouped from operations. The Commission’s complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5 and Securities Act Section 17(a). The U.S. Attorney’s Office for the Southern District of New York filed a parallel action.

FinCEN

Advisory: The Financial Crimes Enforcement Network or FinCEN, issued an advisory on the financing of ISIS, dated April. 1, 2025 (here).

BaFin

Remarks: Jens Obermoller, Director General of IT Supervision spoke about the manner in which companies and supervisors have been preparing for the new rules for DORA and what will happen on issuance, on February 28, 2025 (here).

Singapore

Remarks: The Monetary Authority of Singapore issued remarks on market conditions dated April 3, 2025 (here).


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