RegNews will next publish on 30th May.
SEC secures final judgments in $11 million penny stock fraud
The Securities and Exchange Commission (SEC) has obtained final judgments against a stock promoter and a microcap issuer involved in an $11 million penny stock fraud scheme that was initially charged in August 2021.
On May 23, 2023, the US District Court for the Southern District of New York issued a final judgment against Eleazar Kauderer, a professional stock promoter, for his participation in the fraudulent scheme. The SEC’s complaint, filed on May 17, 2023, alleged that Kauderer conducted a deceptive promotional campaign for HempAmericana, Inc., a struggling microcap issuer, between 2017 and 2019.
The court imposed a five-year penny stock bar and ordered Kauderer to pay $888,012 in disgorgement and $23,782.74 in prejudgment interest. Due to Kauderer’s significant cooperation, no penalty was sought.
Fraudulent commodity trader settles charges
Sharief Deona McDowell has been ordered to pay restitution and penalties totaling $4,753,019.92 by the Commodity Futures Trading Commission (CFTC). The charges against McDowell include fraud related to options on commodity futures contracts and operating as a commodity trading advisor (CTA) without proper registration.
According to the CFTC, McDowell, through her company Presidential Investments LLC, orchestrated a fraudulent scheme between October 2018 and March 2022. She solicited more than $2 million from at least 29 individuals and entities, promising to trade commodity futures contracts and options on their behalf. However, instead of using the funds for trading purposes, McDowell misappropriated the money for personal gain.
McDowell portrayed herself as a CTA, despite not being registered or exempted as required by the Commodity Exchange Act (CEA). She deceived her clients through phone calls, text messages, and emails, making false claims about the use of client funds and the profits generated. Although McDowell provided fabricated trade confirmations and updates, suggesting successful trading, she did not engage in any trading on behalf of her clients.
In response to the charges, the CFTC ordered McDowell to cease any further violations of the CEA and CFTC regulations. Additionally, she faces permanent registration and trading bans. McDowell’s restitution amount has been set at $2,376,509.96, equivalent to the funds she misappropriated, while the civil monetary penalty imposed on her matches the restitution sum.
FCA issues CP to help strengthen protection for customers facing financial difficulties
The Financial Conduct Authority (FCA) has issued Consultation Paper CP23/13 Strengthening Protections for Borrowers in Financial Difficulty: Consumer Credit and Mortgages. The consultation sets out how the FCA plans to incorporate aspects of the Tailored Support Guidance (TSG — which was introduced during the coronavirus pandemic to advise firms how they could help support customers struggling financially) into the Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebooks and withdraw the TSG. The regulator also proposes targeted additional changes to support consumers in financial difficulty.
Comments are requested by 13th July.
ESAs consult to amend technical standards on the mapping of ECAIs’ credit assessments
The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) launched today a public consultation to amend the Implementing Regulations on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk. The Implementing Regulations are part of the EU Single Rulebook for banking and insurance aimed at creating a safe and sound regulatory framework consistently applicable across the European Union (EU). The consultation runs until 26 June 2023.
The proposed amendments reflect the outcome of a monitoring exercise on the adequacy of existing mappings, namely those to the credit quality steps (CQS) allocation for four ECAIs and the introduction of new credit rating scales for seven ECAIs as well as the withdrawal of the registration of one ECAI.
The deadline for the submission of comments is 26 June 2023
A selected summary of key developments for regulated financial institutions
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