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Securities Archives

Merrill Lynch to Pay $42 Million Penalty for Obscuring Trade Locations

The brokerage firm, Merrill Lynch Pierce Fenner & Smith Inc. ("Merrill Lynch"), agreed on June 19, 2018 to pay a $42 million fine to the U.S. Securities and Exchange Commission ("SEC") for misleading its customers as to where their trades actually occurred. This agreement follows a previous $42 million fine in March settling identical allegations from the office of the New York Attorney General.

Judge Isn't Convinced by Defense's Argument at NYU ERISA Trial

U.S. District Judge for the Southern District of New York, Katherine B. Forrest, was not convinced by the May 16 closing arguments in an Employee Income Retirement Security Act ("ERISA") class action lawsuit against New York University ("NYU"). The suit alleges that NYU's retirement committee mismanaged employees' retirement savings, and Judge Forrest interrupted defense counsel multiple times to question if the committee members were knowledgeable enough to oversee NYU's two plans.

What is churning, and what is Finra proposing to do about it?

Imagine that you’re a “typical” securities investor in that you do not have vast resources at your ready disposal to guide your investment decisions. Instead, like most other Americans, you rely upon the advice of a professional broker or adviser to promote your best financial interests.

$10 Million goes to Plaintiffs in ERISA case against Farmers & Merchants

On April 11, 2018, U.S. District Judge Wendy Beetlestone was asked to grant the preliminary approval of a $10 million settlement in a putative class action ERISA suit against Farmers & Merchants Trust Company of Chambersburg ("F&M") in which more than 200 employees of the company allegedly paid into more than 500 employee benefits plans, and had millions of their dollars from their retirement funds diverted by a former attorney, John Koresko ("Koresko"). The settlement would resolve allegations that F&M breached its fiduciary duty under ERISA by allowing Koresko to divert $38.4 million of plan assets to his personal accounts, which money was allegedly spent "on boat rentals, property purchases in South Carolina and the Caribbean, and lobbying expenses, among other things." According to the complaint, F&M, now known as Community Trust Co., oversaw the two trusts that Koresko established to allegedly steal nearly $40 million from plan participants for over a decade. Koresko set up the trusts through now-defunct companies in order to market life insurance policies to various employee-benefits plans, the complaint alleged. After more than 500 plans purchased the policies, Koresko allegedly placed the plan assets into the trusts. Court documents detailed how Koresko transferred the interest from the trusts into more than 20 accounts he controlled, then allegedly used a portion of the money to make unauthorized loans that damaged the financial health of the life-insurance policies. As the trusts' administrator, F&M should have stopped this behavior, the plaintiffs said in the 2015 lawsuit against the company.

Whistleblower Is Awarded $2.2M Under Dodd-Frank Safe Harbor Rule

On April 5, 2018, the Securities and Exchange Commission ("SEC") announced that it has awarded $2.2 million to a whistleblower whose initial tip to another federal agency led to an SEC enforcement action. This marks the first instance in which the SEC has awarded a whistleblower for information from a tip that was previously reported to a different federal agency.

Consolidation of Suits over Alleged Data Breach of Wendy's Shareholders

On March 30, 2018, the Honorable Timothy S. Black of the U.S. District Court for the Southern District of Ohio consolidated two filed class actions against Wendy's brought by shareholders, Thomas Caracci and James Graham ("Graham"), accusing the fast-food chain's top executives and board of directors of making poor security decisions that led to a 2016 data breach.

SCOTUS steps in with key Dodd-Frank whistleblowing ruling

Financial regulators from the U.S. Securities and Exchange Commission have long insisted that the impressive protections extended whistleblowers under the seminal Dodd-Frank legislation be liberally construed. That is, they are stated to apply to individuals who bring fraud-related charges to both the SEC and via other outlets, such as to company managers, various agencies and members of Congress.

What are the basics underlying Dodd-Frank whistleblowing?

Congress passed the consumer-protective Dodd-Frank legislation in 2010. The law's passage owed partially to a widespread belief that greater safeguards needed to be established for individuals brave enough to step forward and identify violations of U.S. securities laws within their companies.