2017
The following are summaries of administrative actions and orders taken from April 1 through June 30, 2017.
Trevor M. Carney: Fined, Reprimanded
Securities Commissioner John Morgan entered a Disciplinary Order on June 21 that fined and reprimanded Trevor M. Carney, a securities agent in Austin, for failing to disclose tax liens.
Carney is an agent with Ascendant Alternative Strategies LLC in Austin. The order levied a $7,500 fine against Carney for failing to disclose tax liens the IRS filed against him in 2008 and 2009. The first lien was for $101,675, the second, $138,733.
Carney violated State Securities Board rules by not disclosing the liens in securities filings. Liens and unsatisfied judgments must be timely reported in the filings.
Provident Capital Management Inc.: Suspended, Fined
Provident Capital Management Inc. , an investment adviser in Dallas, started serving a 60-day suspension on June 19 and paid a fine of $8,000 for failing to establish and enforce compliance procedures to protect its clients.
Securities Commissioner John Morgan entered a Disciplinary Order that cited Provident Capital Management for failing to disclose specific required language in advisory contracts with clients.
The firm did not provide its Form ADV disclosure statement to clients and failed to include language concerning wrap fee accounts in its client contracts. Provident Capital Management violated a State Securities Board rule that requires clients to be notified that if they do not receive required disclosure statements in advance they have the right to terminate the contract without penalty within five business days.
The firm also did not enforce written policies and procedures designed to prevent the misuse of material nonpublic information.
PTI Securities & Futures LP: Fined, Reprimanded
Securities Commissioner John Morgan entered a Disciplinary Order June 2 that fined and reprimanded a Chicago-based securities dealer whose compliance officer repeatedly wired funds to individuals pretending to be a 75-year-old Texas client of the firm.
In three separate transactions in 2015, Daniel Haugh, the chief compliance officer of PTI Securities & Futures LP, wired a total of $91,560 from the Individual Retirement Account (IRA) of the Texas client, who had not made any requests for funds to be transferred from his account.
The requests were sent from the client’s email account, which had been compromised.
The subject line of the first email to Haugh requesting a transfer of funds read “[SPAM] Hi Dan.” The email asked Haugh to “please email me the cash balance on all my account.”
The individuals who hacked the client's email account listed a false Social Security number, birth date, and signature on the wire request form. The birth date listed would have made the client 35 years younger than he was. Haugh responded with the account balance, and the email request led to a transfer of $45,780 to an individual in Louisiana.
Haugh wired money a second time from the client's IRA to the same individual in Louisiana, then to another person in Alabama. The client was unrelated to the recipients of the wire transfers and had never wired money to them before.
PTI Securities repaid $91,560 to the Texas client, the full amount inappropriately wired from his account. The order reprimanded the firm and levied a fine of $5,000, which was paid to the State of Texas.
Dback Capital Inc. and Kenneth Edward Shelton: Agreed Cease and Desist Order
Dback Capital Inc. of Dallas and its president, Kenneth Edward Shelton, agreed to stop violating the law by selling stock in two companies to Texas residents.
Texas Securities Commissioner John Morgan entered the Agreed and Cease Desist Order on May 22.
Neither Dback Capital nor Shelton are registered in any capacity to sell securities in Texas. The investments – shares in Intertech Solutions Inc. and Preston Corp. – are not registered for sale in Texas.
The order is the second sanction involving Intertech Solutions, which is based in Scottsdale, Ariz. In a 2016 Agreed Cease and Desist Order Intertech Solutions agreed to stop selling its shares to Texas residents.
In the 2016 order, Intertech sold shares through DBack Capital and Shelton.
Raymond Hill, Mark Diaz, and Wales Marketing and Consultancy: Emergency Cease and Desist Order
Texas Securities Commissioner John Morgan entered an Emergency Cease and Desist Order on May 5 alleging that two investment promoters who are soliciting funds for a stock scheme are falsely claiming to be an existing investment advisory firm in Dallas.
According to the order, Raymond Hill and Mark Diaz are approaching investors and offering to purchase their stock in what is known as an advance fee scheme. Investors who accept ultimately have to pay money to cover costs associated with the transactions.
Hill and Diaz are promoting their advance fee scheme through a fake website, social media, forged documents, and purported affiliations with the IRS. The pair are asking stock owners to pay certain costs to a company in the Philippines.
Hill and Diaz established two websites with names similar to Cain Capital LLC, a firm registered with the Securities and Exchange Commission. One of the fake sites routes visitors to a legitimate regulatory filing Cain Capital made with the SEC. The site also links to a Facebook page and Twitter account purportedly belonging to Cain Capital.
Neither the websites nor social media established by Hill and Diaz are related to Cain Capital, but they create the impression the pair are working with a properly registered investment advisory firm.
Hill and Diaz are sending unsolicited emails to potential investors in their stock scheme. The emails include documents on letterhead in the name of Cain Capital.
Hill and Diaz are notifying investors that they have identified a buyer for stock held by a shareholder. The owner of the stock must pay a brokerage fee of 2% of the purchase price of the stock to Cain Capital. The promoters are also telling stock owners that the IRS collects a tax from the transaction and it must be paid through a third-party bank to Wales Marketing and Consultancy in Makati City, Philippines.
Marie P. Goforth: Suspended
Texas Securities Commissioner John Morgan entered a Disciplinary Order May 4 that suspended Marie P. Goforth, an investment adviser in San Antonio, for 45 days and placed her under heightened supervision.
The order also granted Goforth's registration with Minot, North Dakota-based Capital Financial Services Inc. as an investment adviser representative and agent.
Goforth applied for registration in Texas in January, five months after LPL Financial LLC fired her for violating the firm's policy on document signatures.
At LPL Goforth maintained blank forms signed by clients and reused a form signed by one client for two third-party check requests. Both actions were violations of LPL's document signature policy.
The order granting Goforth's registration stipulates that she will not maintain blank signed client forms and requires Capital Financial Services to perform two unannounced reviews of her client files.
Kermit Gordon Gable Jr.: Suspended
Texas Securities Commissioner John Morgan entered a Disciplinary Order on April 10 that suspended Kermit Gordon Gable Jr., an Arlington investment adviser representative, until Sept. 7.
In December, Gable applied for registration as an investment adviser representative of Fidelis FS LLC. The Order granted Gable's registration but suspended him because of trading practices at his former firm, Cambridge Research Advisors Inc.
Cambridge Advisors permitted Gable to resign in November after he made improper trades in client advisory accounts and his personal account. Gable didn't comply with Cambridge Advisors' requirements for block trading, a practice in which multiple orders for securities are aggregated to get the best terms for a group of clients.
Gable traded securities in his account in some of the block trades, but he failed to follow firm procedures to avoid conflicts of interest between his trades and his clients' interests.
Brad Cain: Fined, Reprimanded
Texas Securities Commissioner John Morgan entered a Disciplinary Order on April 4 that fined Brad Cain, an investment adviser representative in Lindale, for not disclosing three agreements with creditors as required by State Securities Board rules.
The order fined Cain $3,500. It also granted his registration as an agent and investment adviser representative of Cetera Advisor Networks LLC. Cain reached compromises with the creditors in 2010, but did not disclose them until last month.
State Securities Board rules require a registered agent or investment adviser representative to report any changes in information previously filed with the Securities Commissioner within 30 days.
A compromise with a creditor is an agreement where the creditor accepts less than the full amount of the debt.
Cain agreed to one compromise with Bank of America and two with CitiBank.