SEC Charges Marcum's National Assurance Services Leader with Quality Control Deficiencies

SEC Charges National Office Partner at Marcum for Causing Widespread Quality Control Deficiencies

The Securities and Exchange Commission today charged Alfonse Gregory Giugliano, CPA, the former National Assurance Services Leader at Marcum LLP, a public accounting firm, with failing to sufficiently address and remediate numerous deficiencies in Marcum’s quality control system. The SEC previously charged Marcum for these quality control deficiencies and other violations, many of which were in connection with Marcum’s audit work for hundreds of special purpose acquisition companies (SPACs).

According to the SEC’s order, Giugliano oversaw quality control for Marcum’s public company practice, including the firm’s relevant quality control policies, procedures, and monitoring, and directly or indirectly supervised all personnel working within Marcum’s quality control functions. The SEC’s order finds that exponential growth in Marcum’s public company practice exposed substantial deficiencies in these functions. Moreover, according to the SEC’s order, Giugliano was aware that inspections by the Public Company Accounting Oversight Board (PCAOB) and by Marcum itself revealed numerous deficiencies in Marcum’s quality control system. The SEC’s order finds that Giugliano did not sufficiently address and remediate these deficiencies, leading to quality control and audit standard violations throughout Marcum’s audit work, such as client acceptance, engagement partner supervision and review, audit documentation, and technical consultations. In addition, under Giugliano’s leadership of Marcum’s quality control system, the firm did not sufficiently monitor the effectiveness of many policies and procedures and, in many areas, did not adequately communicate those policies and procedures to relevant personnel.

SEC Charges Virtu for False and Misleading Disclosures Relating to Information Barriers

The Securities and Exchange Commission today filed charges against broker-dealer Virtu Americas LLC and its parent company, Virtu Financial Inc. (collectively, Virtu), for making materially false and misleading statements and omissions regarding information barriers to prevent the misuse of sensitive customer information.

As alleged in the SEC’s complaint, Virtu Americas and its affiliates operated two businesses that it purported to have walled off from each other: an order execution service for large institutional customers, whereby Virtu Americas executed customer orders, typically for a commission, and a proprietary trading business, through which Virtu Americas bought and sold securities for its own accounts and benefit. From approximately January 2018 through the beginning of April 2019, however, Virtu Americas allegedly failed to safeguard a database that contained all post-trade information generated from customer orders routed to, and executed by, Virtu Americas, including customer identifying information and other material nonpublic information. The SEC’s complaint alleges that this database was accessible to practically anyone at Virtu Americas and its affiliates, including their proprietary traders, through two sets of widely known and frequently shared generic usernames and passwords. Virtu Americas’ failure to safeguard this information created significant risk that its proprietary traders could misuse it or share it outside Virtu Americas. For example, a Virtu Americas proprietary trader allegedly could observe that Virtu Americas had executed the orders of a large institutional customer throughout the day, understand that the same customer may follow a similar trading pattern over the next days, and take advantage of such information by trading ahead of the customer’s subsequent orders.

SEC Charges Alternative Investment Platform YieldStreet for Misleading Investors

The Securities and Exchange Commission today announced a settled action against New York-based YieldStreet Inc. and its registered investment adviser subsidiary, YieldStreet Management LLC (together, YieldStreet), for failing to disclose critical information to investors in a $14.5 million asset-backed securities offering.

According to the SEC’s order, in September 2019, YieldStreet offered securities to finance a loan a YieldStreet affiliate made to a group of companies to transport a retired ship and arrange its deconstruction. The SEC’s order finds that the collateral for the loan was the ship to be deconstructed and that YieldStreet’s right to the ship was the most important security for the loan and the securities that YieldStreet sold to investors.

According to the order, YieldStreet failed to disclose to investors a heightened risk that it would be unable to seize the ship in the event of a default….

Ex-FTX GC Launches Law Firm, Says His ‘Hugely Disappointing Experience’ Will Be Asset for Clients

Ryne Miller, the former U.S. general counsel of cryptocurrency exchange FTX, has started his own New York-based firm that will advise digital asset and blockchain companies and traditional financial firms on regulation, regulatory investigations and crisis management.

In an interview with Law.com, Miller said he came up with the idea for Miller Strategic Partners after he left FTX in March. With his background and experience with trading and markets, digital assets and government investigations, he said it made sense to set up his own shop.

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Miller spent a 18 months at FTX, giving up his partner position at Sullivan & Cromwell to become general counsel at the exchange in August 2021. A little over a year later, the exchange abruptly collapsed due to what corporate turnaround expert John Jay Ray called “a complete failure of corporate control.”

Sens. Ossoff, Kelly Introduce Bill Banning Stock Trading by Members of Congress

U.S. Senator Jon Ossoff is introducing legislation to ban stock trading by members of Congress.

Sens. Ossoff and Mark Kelly (D-AZ) today introduced the Ban Congressional Stock Trading Act, which will require all members of Congress, their spouses, and dependent children to place their stocks into a blind trust or divest the holding — ensuring they cannot use inside information to influence their stock trades and make a profit.

The American people overwhelmingly support this policy, with 86% saying they back the measure, including 88% of Democrats, 87% of Republicans, and 81% of Independents.

Senate Republicans Grill S.E.C. Chair on Pace of Rule Making

At a hearing of the Committee on Banking, Housing and Urban Affairs regarding oversight of the S.E.C., Senator Tim Scott, Republican of South Carolina, said the commission was proposing rules and regulations at “a breakneck pace.” Mr. Scott, who is seeking the 2024 Republican nomination for president, said the commission did not always give businesses and investors sufficient time to “digest complex rule changes” and fully respond.

Senator Katie Britt, Republican of Alabama, said some of the rules the S.E.C. had proposed were “half-baked” and were not intended to address a “market failure” like the financial crisis of 2008.

Some of the proposed rules that senators singled out concerned climate change disclosures by public companies and regulating the use of predictive analytical programs, like artificial intelligence, by investment advisers.

Gary Gensler confirms SEC’s use of AI for financial surveillance

United States Securities and Exchange Commission (SEC) Chair Gary Gensler testified on Sept. 12 in a Senate oversight hearing that his agency was currently using artificial intelligence (AI) technologies to monitor the financial sector for signs of fraud and manipulation.

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When asked by Sen. Catherine Cortez Masto how he envisioned the SEC using AI, Gensler responded:

“So, we already do. In some market surveillance and enforcement actions. To look for patterns in the market. … It’s one of the reasons why we’ve asked Congress for greater funding this year, in 2024, to help build up our technology budget for the emerging technologies.”

‘Cryptoqueen’ partner gets 20 years prison in $4 billion ponzi fraud

The co-founder of the fraudulent OneCoin cryptocurrency, a massive pyramid scheme that amassed more than $4 billion from millions of investors worldwide, was sentenced Tuesday to 20 years in prison.

Karl Greenwood, 46, who orchestrated the multibillion-dollar multilevel marketing con, pleaded guilty in December to wire fraud and money laundering charges.

His partner, Ruja Ignatova, 43, known as the “Cryptoqueen” on the FBI’s Top 10 Most Wanted list, remains at large, the U.S. Department of Justice said.