Compliance
Compliance Corner: SEC, FINRA

The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.
SEC
The Securities
and Exchange Commission has pursuaded a court to freeze some
assets and taken other steps against a Florida-based investment
advisor because of an allegedly fraudulent offering.
The regulator filed an “emergency action” against Coral Gables
Asset Management LLC and its sole owner, David C Coggins. On
August 20, US District Court Judge Kathleen M Williams granted
the SEC's request for emergency relief, including an asset freeze
and an order for records preservation, against Coggins and Coral
Gables, as well as two entities charged by the SEC as relief
defendants.
Coral Gables and Coggins solicited investors for a private fund
they managed by misrepresenting the fund's past performance, the
amount of assets they were managing, and Coggins' experience as a
portfolio manager, the SEC said in a statement.
For example, the complaint alleges that one document Coggins
provided to investors and potential investors showed 37 months of
positive monthly performance even though, in reality, in
approximately 26 months during the specified timeframe the fund
had negative performance.
The SEC also claims that Coral Gables and Coggins falsified
brokerage records and investor account statements and created and
sent fake audit opinions to investors and third parties. As
alleged, within hours of receiving a request from the SEC to
preserve documents, Coggins destroyed evidence related to his
fraudulent conduct. According to the complaint, Coggins
misappropriated investor funds for personal use, including a
luxury vehicle and travel.
"As we allege, Coggins drew in investors by suggesting that he
was an experienced manager with a highly successful private fund
and then took elaborate steps to conceal the truth of his fraud,
including destroying evidence after being contacted by the SEC,"
Kurt L Gottschall, director of the SEC's Denver regional office,
said. "The SEC's emergency action is intended to protect
prospective investors from future harm by halting what we allege
is an ongoing fraud and preserving the remaining evidence."
The SEC's complaint, filed in the US District Court for the
Southern District of Florida, charges Coral Gables and Coggins
with violating antifraud provisions of the federal securities
laws. The SEC's complaint also charges Coggins, in the
alternative, with aiding and abetting Coral Gables' violations of
the Investment Advisers Act of 1940. The SEC seeks injunctions,
disgorgement of allegedly ill-gotten gains with prejudgment
interest, and financial penalties against the defendants. The SEC
also charged Coral Gables Asset Holdings, LP and its successor
entity, Coral Gables Capital, LP, as relief defendants.
The SEC investigation into the matter continues.
FINRA
The US wealth advisory industry group and regulator has postponed
all in-person arbitration and mediation proceedings scheduled
through October 30, 2020 because of the continuing COVID-19
crisis. However, such proceedings will not be affected if the
parties stipulate to proceed telephonically or by Zoom, or the
panel orders that the hearings will take place telephonically or
by Zoom.
FINRA said its Office of Hearing Officers has postponed all
in-person hearings of disciplinary proceedings scheduled through
October 2, 2020. Disciplinary hearings scheduled to occur after
October 2, 2020, will be assessed on a case-by-case basis to
determine if FINRA will conduct or further postpone each
individual hearing, it said.