Lawyers argued before the Supreme Court on whether a key provision of the Securities and Exchange Act should protect foreign fraud victims when the alleged scammer has a U.S. subsidiary. "This case has 'Australia' written all over it," Justice Ruth Bader Ginsburg said. The law's scope is pivotal, as courts increasingly face lawsuits over transnational fraud.

Three Australians who bought stock in National Australia Bank, the country's largest bank, filed a class action when the bank was forced to write down more than $1.75 billion on HomeSide Lending, a U.S. mortgage service provider the bank bought in 1998.

The bank had to sell the Florida-based subsidiary after HomeSide miscalculated how much revenue it would receive from mortgage-backed securities in 2001. Investors said the bank, HomeSide and four officers made false and misleading statements in SEC filings. When those statements were revealed in Australia, they allegedly caused the bank's stock price to plummet.

A final ruling is expected by late spring or early summer.

Click on the following link to read more on the Justices Hear Debate on Scope of Anti-Fraud Law - Courthouse News Service

The DOJ takes cyber crimes seriously, as Albert Gonzalez has found out. U.S. District Court Judge Douglas P. Woodlock sentenced Gonzalez to 20 years and one day in prison for two conspiracy counts in connection with his efforts to help gain access to the payment card networks of numerous nationwide retailers. The judge also ordered Gonzalez to pay a fine of $25,000 as well as serve a three year supervised release upon completion of his prison term.

This sentencing comes in addition to an earlier sentence issued against Gonzalez by U.S. District Judge Patti B. Saris for aggravated identity theft, computer fraud, conspiracy, and access device fraud among others. In this sentence, the judge also ordered Gonzalez to serve 20 years in prison in addition to a three year long supervised release after completing his prison term, and a $25,000 fine.

Court documents indicate that Gonzalez and his co-conspirators used sophisticated methods such as “wardriving” (attempting to locate unsecure wireless computer networks with a laptop while driving) and “sniffer programs” designed to capture card information during transfers. According to court documents, Gonzalez and his cronies stole more than 40 million credit and debit card numbers from retailers using these or similar techniques, and then sold the numbers to others for fraudulent use.

According to Federal prosecutors, the actions of Gonzalez and his co-conspirators cost a number of companies, banks, and insurers some $200 million in addition to victimizing millions of people. U.S. Attorney for the Eastern District of New York, Benton J. Campbell, made the following statement about the matter:

"Computer hackers and identity thieves pose serious risks to our commercial, personal and financial security. Today’s sentence should serve as a warning to would-be hackers everywhere, including those who commit their crimes from abroad – you will be found, prosecuted and convicted."

Wall Street look out... Change is in the air...The Senate Banking Committee passed a sweeping financial regulation bill on March 22. The bill now moves to the Senate for a full vote.

President Obama and his senior advisers are now planning to focus more on issues such as financial regulation reform. The administration is “seeking to tap into the anger among many voters over Wall Street excesses” that are at the root of the current economic crisis.

The financial regulation bill ultimate goal is to increase investor protections. If signed into law, the financial reform bill that passed the Senate panel would create a bureau within the Federal Reserve that provides investors with a greater level of security. The bill would also establish a regulatory council to “survey threats to the financial system.”

According to U.S. Senator Richard Shelby (R-Ala) major points of disagreements in the bill incude the following areas: the powers of a Consumer Financial Protection Bureau that would be created within the Federal Reserve, regulation of the sprawling market in over-the-counter derivatives and provisions that would give corporate shareholders a greater say over executive pay and boards of directors.

President Obama stated:

"We are now one step closer to passing real financial reform that will bring oversight and accountability to our financial system and help ensure that the American taxpayer never again pays the price for the irresponsibility of our largest banks and financial institutions."

The Financial Industry Regulatory Authority (FINRA) expelled Dallas-based broker-dealer, Management, LLC, for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties, LLC, in a massive Ponzi scheme.

The recent action is the first produced by a FINRA initiative involving active examinations and investigations of broker-dealers involved in retail sales of private placement interests, as well as broker-dealers affiliated with private placement issuers. FINRA is looking at firms' compliance with suitability, supervision and advertising rules, as well as potential instances of fraud. The initiative was undertaken in response to an increase in investor complaints involving private placements and Securities and Exchange Commission actions halting sales of certain private placement offerings.

According to FINRA, Provident Asset Management misrepresented to investors that the funds raised through the offerings would be used to purchase interests in the oil and gas business. In reality, investors' funds were used by an affiliated issuer and commingled to make dividend and principal payments to other investors. To make matters worse, the firm acted as the agent in an oil and gas private placement offering but failed to establish an escrow account for investors' funds during the contingency period of the offering.

FINRA found that Provident Asset Management marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by Provident Royalties, LLC. from September 2006 through January 2009. Provident Asset Management's only business line was acting as the wholesaling broker-dealer for the Provident Royalties' offerings, which were sold to customers through more than 50 retail broker-dealers nationwide, raising over $480 million through approximately 7,700 individual investments made by thousands of investors.

FINRA is continuing a broader investigation into broker-dealers that sold the Provident and other troubled private placement offerings.

SEC Chairman Mary Schapiro has video interview with Washington Post Editorial writer Charles Lane. The interview discusses improvements at the agency including: Madoff ponzi scandal, oversight of Lehman Brothers Holdings, inadequacies of the SEC's Consolidated Supervised Entity (CSE) Program, expectations for regulatory reform, fiduciary standard of care by brokers and new SEC investor protection oriented rules.

First Allied Securities, Inc, a San Diego-based broker-dealer, was charged with failing to reasonably supervise one of its registered representatives. The Broker engaged in unauthorized fraudulent trading in the accounts of two Florida municipalities. The Securities Exchange Commission (SEC) reports that First Allied has agreed to settle the charges for nearly $2 Million.

The SEC alleges that Harold H. Jaschke, former First Allied Broker, churned the accounts of two Florida municipalities and misrepresented his trading practices on their behalf. The two Florida Municipalities involved, were the City of Kissimmee and the Tohopekaliga Water Authority. In late 2009, Harold Jashke was charged with fraud for making over $4 million in commissions while his customers lost money due to his fraudulent behavior.

The SEC found that this fraud occurred from May 2006 and March 2008. This matter could have been avoided if First Allied identified the "red flags" and adequately supervised Jaschke, according to SEC reports.

The supervision of broker-dealers is taken seriously by the SEC. Rosalind Tyson, Director of the SEC’s Los Angeles Office stated the following:

"By failing to establish reasonable systems to prevent Jaschke’s misconduct, Fist Allied did not fulfill its obligation to reasonably supervise its registered representative.”

In addition to the settlement, First Allied agreed to censorship by the SEC. They will cease and desist from “committing or causing any future violations of certain books and records provisions,” and will hire an independent consultant to review First Allied's company’s policies and procedures.

Investor Tip: Be aware of your Broker’s method of managing your portfolio. A common fraudulent practice by brokers is the use of excessive trading to generate commissions and other revenue without regard for the customer's investment objectives, this practice is known as churning.

We encourage Investors to read monthly statements carefully. Ask questions about your Broker's investment strategy for your portfolio. If you suspect find that a Broker is engaging in unethical behavior with your investments, speak up and do so quickly. This can help save many headaches if the fraud is caught early on.

Cllick on the following link to read more on First Allied Securities, Inc being charged with failing to Supervise.

Click on the following link to learn more about Churning and Securites Fraud.

The U.S. Securities and Exchange Commission charges owner of Delphi Investment Group with Securities fraud. The interesting twist is that the owner is Sean David Morton, a California based psychic. Allegedly, Morton billed himself as "America's Prophet" and scammed investors out of more than $6 million. The SEC calls Morton a con artist who "falsely touted historically predicting rises and falls in the market."

The SEC complaint provides great detail of how Delphi Investment Group masterminded their securities fraud scheme.

1) Morton used common practices such as a monthly newsletter, Delphi Associates Newsletter and a nationally syndicated radio show to attract and lure investors. In addition, he held public events to promote his psychic abilities.

2) Morton, who did not seek accreditation status from the Delphi Investment Group investors, placed investor funds in the bank accounts of the Entities, which were shell companies controlled by Morton and his wife and commingled the investors' funds among the Entities' accounts.

3) Morton promised investors that all funds would be used to trade foreign currencies, however, only invested about half of the funds with foreign currency. Unbeknownst to the investors, Morton and his wife diverted some of the investor funds, into their own nonprofit organization, PRJ.

The Financial Industry Regulatory Authority (FINRA) released a 16-page letter announcing that it is issuing its 2010 annual examination priorities, on March 1st. The letter includes information on both new and existing areas of importance to FINRA’s yearly examination program. The letter discusses priority topics from FINRA’s Market Regulation and Member Regulation Departments, and the organization’s Enforcement Department.

The financial decline of 2009 exposed investment frauds “perpetrated by registered and unregistered parties”. As a result, the agency plans to heighten its focus, and to execute regulatory programs that are both rigorous and thorough. The idea is to provide investors with the best possible protection from investment fraud.

Some of the organization’s new developments include:

• The establishment of the Office of Fraud Detection and Market Intelligence in order to provide such services as a heightened review of serious fraud allegations;

• An expansion of BrokerCheck and other disclosure expansions to make it easier for investors to find information about brokers;

• A rule consolidation process designed to create a new consolidated rulebook; and

• The eFOCUS Filing Platform that will allow firms to submit certain reports to FINRA electronically.

FINRA encourages investment providers and investors to use the information in the letter to “gain valuable insights into key FINRA examination and regulatory topics.”

Click on the following link to read the 2010 FINRA Annual Examination Letter.