Not The Glengarry Leads:
In December, the SEC charged former San Francisco-based stockbroker Sidney Mondschein with securities fraud and regulatory violations. Mondschein was allegedly selling his clients' personal information — many of them elderly — as insurance sales “leads.” According to the SEC complaint, between December 2002 and August 2005, Mondschein sold the names and other confidential information of over 500 of his customers to six different insurance agents. The complaint says nearly all of Mondschein's clients were senior citizens, and that many of them had already purchased fixed- or equity-indexed annuity products. “This case is an example of our ongoing commitment to combat abusive and illegal conduct that targets senior citizens,” says Linda Thomsen, director of the SEC's Division of Enforcement.
In exchange for the leads, the insurance agents allegedly compensated Mondschein on either a price-per-lead basis — from $50 to $150 per lead — or with a 2-percent kickback on the total amount that the individual then invested in a new annuity. Mondschein also allegedly collected brokerage commissions from these clients when they used him to sell securities in their accounts to fund the purchase of the new annuity.
The complaint further alleges that the insurance agents sent business Mondschein's way by recommending that their clients use him instead of their own brokers to sell their securities. According to the SEC, this is the second enforcement case alleging violations of Reg S-P, which requires brokerage firms to let customers know how their personal information is used. It is also one of more than 40 enforcement actions taken in the last two years against fraud targeting older investors.
SEC Sues Manager For Insider Trading:
David Knall, an investment advisor and broker with Stifel Nicolaus, agreed to a settlement with the SEC after the regulator sued him in December. Knall was sued by the SEC for personal trading in advance of the merger announcement of two companies, Dick's Sporting Goods and Galyan's Trading Company. The SEC alleged that prior to the merger announcement, Knall received non-public information related to the move, which he then used to buy 10,000 shares of Galyans, a company he'd previously held short. The day after the merger announcement, Galyan's stock went up 50 percent. Knall neither admitted nor denied guilt, and agreed to pay $123,865. That total included $13,303 in interest and a one-time civil penalty of $55,281, equal to the amount Knall would have lost if he had maintained his short position in stock of Galyan.