FINRA Sanctions Trainee for Claiming He Almost Passed the Series 7 Exam.

He totally almost nailed it.

Failing tests can be embarrassing. But failing the Series 7 Exam can be particularly embarrassing. Why? Because an individual must be sponsored by a broker-dealer firm just to sit for the exam.

This involves credit and criminal background checks, fingerprints, and the filing of Finra’s infamous Form U4, with its probing questions about criminal charges, lawsuits, regulatory actions, bankruptcies, liens, employment terminations and other categories.

Broker-dealers don’t slog through this regulatory process out of a charitable desire to further the education of others. Rather, they typically plan to employ the individual as a new financial advisor (a new “producer,” as they are affectionately called). Many broker-dealers even pay a small salary to individuals while they study. Firms such as Merrill Lynch, Morgan Stanley and Wells Fargo, for example, have well-attended training programs, in which the firms pay the “trainees” to attend internal training and provide Series 7 study materials at no cost.

In other words, the broker-dealers put their faith, their time and their funds into their trainees. It’s like sponsoring a prize fighter and then betting he will win. As such, it can be rather humiliating to have to report to your sponsoring broker-dealer that the exam knocked you out. In addition, a failing score often marks the end of the sponsorship. So what’s a trainee who failed the Series 7 to do?

The “Almost Nailed it” Approach

According to a recent Finra settlement,* a former Merrill Lynch trainee has allegedly devised a new method of breaking the bad news to a sponsoring broker-dealer (allegedly, because in the settlement, the trainee did not admit the truth of Finra’s allegations). As a condition of employment, the trainee was required to pass the Series 7 Exam by February 19, 2013. Nearing his deadline, he sat for the Series 7 Exam on January 31, 2013.

The Series 7 Exam, or “General Securities Representative Qualification Examination,” qualifies an individual (who is registered with a broker-dealer) to solicit and to execute purchases and sales of securities on behalf of customers. The exam is held at formal testing centers around the country. It has 250 multiple choice questions, administered in two three-hour sessions of 125 questions each.

The exam is either very hard, or very easy, depending on who you ask. Josh Brown, of Reformed Broker fame, was not impressed:

The Series 7 exam requires you to memorize enough useless information to get through a 6-hour, 250-question test. Most of the useful calculations one learns for the test are done by computers in the real world, and most of the ethics questions are obvious, making this the most pointless barrier-to-entry exam being given in the United States today. You should meet some of the cavemen I know who’ve managed to pass it.

Brown, Joshua M., Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments. McGraw-Hill. Kindle Edition (2012-03-06).

Whether or not the exam is substantively useless, there does appear to be a useful correlation: the more times a qualifying exam was retaken, the higher the average total of black marks on a stockbroker’s record. Stockbrokers Who Fail Test Have Checkered Records, Wall Street Journal, April 13, 2014.

In any event, the test proved hard for the Merrill Lynch trainee mentioned above. After six hours of clicking answers into a computer, he scored a 58%. This was unfortunate because 72% is the minimum score required to pass. If a 72% is viewed as the lowest possible D minus, then a 58% is a rather solid F.

After many weeks of paychecks, training and support, one supposes that our trainee was in no mood to report a solid F to Merrill Lynch. Plus, a solid F would likely guarantee that Merrill Lynch would not sponsor him for a second try. It would be much better, he reasoned, if he could report a less solid F. And so a plan was hatched.

Close only counts in. . .

According to the Finra settlement, after the exam, the trainee received a printed score report from the exam proctor showing his score, including the scores he received on each of the five sections of the exam. This was no doubt an unpleasant experience: not as bad as being handed a draft notice, but worse than being handed divorce papers.

According to Finra, he then “falsified” a version of the official score report to show that he had scored — not a solid F, but rather, a far more respectable 68%, an F+. He also allegedly emailed a supervisor at Merrill Lynch explaining that, although from a strictly technical perspective he did not pass, all was good because he had scored a gentleman’s 68%. In other words, he totally almost nailed it.

Drinks were definitely in order. That is, until Merrill Lynch and Finra discovered that the trainee had not totally almost nailed it.

Finra Enforcement Steps In

This little fib, made to his broker-dealer, and not to Finra, was deemed worthy of substantial punishment by Finra. In the settlement, the trainee consented to a $5,000 fine and a two-month suspension from associating with a broker-dealer in any capacity.

So what Finra rule did he violate? Finra found that he violated Finra Rule 2010, which provides:

A registered representative candidate shall not claim to have totally almost nailed the Series 7 Exam when in fact a solid F was earned.

As you can see, this is a very clear, specific rule. There’s no question that our trainee flagrantly violated it. He really ought to be ashamed of himself. Just kidding, here’s Finra Rule 2010:

A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.

This is sometimes called Finra’s “catch all” rule because it captures a wide variety of unethical conduct that is not specifically prohibited by another rule. Nobody really knows what the rule means. But that’s the idea. It forces advisors to think twice about a course of action, lest it later be deemed by Finra to be below “high standards of commercial honor.”

So what do you think? Did our (allegedly) fibbing trainee fall below the standard? While it’s not made explicit in the settlement, one suspects that the trainee reported an inflated score in the hopes that Merrill Lynch would sponsor a second attempt. If Merrill Lynch would have sponsored a second attempt with a 68% but not a 58%, then the fib would have induced Merrill Lynch to expend further time and resources that it would not have, had it known the truth. Duping Merrill Lynch in this way, while perhaps amusing, would seem to fall below “high standards of commercial honor.”

The case would be harder if the trainee knew there was no possibility that Merrill Lynch would sponsor a second attempt, regardless of the first score, as may be suggested by the deadline for passing mentioned in the Finra settlement. That is, if the trainee fibbed solely to try to save face (well, some face; we are still talking about boosting an F to an F+). Would lying to Merrill Lynch simply to save face (again, a very small piece of face, like say half an eyebrow) be sufficient to find a violation? Does no harm no foul apply?

The case would be harder still if the trainee was merely caught bragging to strangers in a night club that he rocked a 68% on the Series 7 Exam, perhaps adding that he did so on his first try. This is considered a downright impressive achievement in some quarters such as night clubs, greyhound tracks, WrestleMania events and around the water coolers at several broker-dealers headquartered in Florida. People could be misled by this conduct, perhaps even potential dating companions (those with very low, but very precise, dating standards). Would a lie about the true depth of his exam failure, uttered outside of the context of the broker-dealer’s business, be sufficient?

At any rate, there is a bright side here for our battered Merrill Lynch trainee: this is almost certainly the last brush he will ever have with Finra. That’s got to be a somewhat pleasant thought.

*As is typical, the trainee settled with Finra without admitting the truth of Finra’s findings and there was no adjudication. See Finra Letter of Acceptance, Waiver and Consent, No. 2013036670002, July 15, 2014.

___________________________

Bonus Material

One Weird Trick For Avoiding Finra Trouble

For those advisors worried about the seemingly endless scope of Rule 2010, just follow this one weird trick to avoid Finra trouble: before each of your daily decisions, pause for one minute and ask yourself this: What would Finra think about me doing this? Some find it helpful to visualize a Finra Enforcement Lawyer leaning over their shoulder.

___________________________

Published by Jeremy L. Bartell

Financially Regulated is published by Jeremy L. Bartell, a long-time admirer of Wall Street and its interesting cast of regulators. Jeremy is an attorney with Bartell Law in Washington D.C. He represents financial professionals nationwide in Finra inquiries and investigations, Finra arbitration, securities employment disputes and registration and disclosure matters.

Risking it all to have “LUTCF” after your name.

You want the acronym “LUTCF” after your name. You want it badly. On your business card. On your website. On your name tag at the annual conference. You’ve got to have it. And you’re willing to work hard, make sacrifices and do anything necessary to get it. It’s just that worth it to you. Unless it requires an exam or studying or something. Forget that. You don’t do exams. Or studying.

So you were upset to learn that a proctored exam is required. It’s a major setback. But you’re no quitter. You briefly consider simply typing LUTCF after your name – easy enough. Freedom of speech right? It looks good in Helvetica, you note. But no, that won’t work. You might be discovered as an impostor, and that would be bad for business. So you’ll have to earn the credential the old-fashioned way – by having someone else take the test for you.

But who? How about one of the moderators overseeing the exam? They probably know their stuff. Luckily you find one willing to do the deed. On the day of the web-based test, you give the moderator your sign-on information, she signs on as you, and viola! You passed with an impressive score. In near record time. You are now a LUTFC, summa cum laude.

Does this sound familiar? If so, you might be the former broker from Farmers Financial Solutions LLC who was recently sanctioned by Finra:

In June 2012 … [the broker] cheated on a Life Underwriter Training Council (“LUTC”) examination by allowing the moderator of the course to take the examination on his behalf. [The broker] also falsely stated on a proctor affirmation that he completed his LUTC examination without assistance. [The broker] then submitted the false affirmation to the Wisconsin Office of the Commissioner of Insurance to obtain unearned state insurance continuing education credits.

While neither admitting nor denying the facts, the broker consented in a settlement with Finra to a two-month suspension and a $10,000 fine. Painful to be sure.

So what is this LUTCF designation that this broker was risking it all to get?

LUTCF stands for “Life Underwriter Training Council Fellow.” It’s a good designation to have, according to the website of the American College of Financial Services, for those who want to increase their bank:

Life Underwriter Training Council Fellow (LUTCF) classes put you on the fast track for success. By combining essential product knowledge with basic planning concepts, the LUTCF has helped thousands of insurance professionals boost their earnings by as much as 40 percent [emphasis original].

But don’t take the American College’s word for it. They are ending support for this designation. It seems the American College used to administer the LUTCF program on behalf of the National Association of Insurance and Financial Advisors (“NAIFA”), but the two have since had a falling out. The American College has ceased offering the LUTCF designation – declared it dead – and started pushing a brand-new designation: the “Financial Services Certified Professional” (“FSCP”). The death of LUTCF was reported on October 9, 2013 on InsuranceNewsNet.com:

You’ve had a great run, Life Underwriter Training Council Fellow (LUTCF). Now step aside, there’s a new designation in town: the Financial Services Certified Professional (FSCP). The demise of the long-standing LUTCF designation for the broader FSCP designation reflects not only lower demand for the LUTCF but a shift in the broadening of what life insurance agents and advisors sell in today’s marketplace, said Dr. Larry Barton, president of The American College of Financial Services…. The LUTCF had become outdated, Barton said. “It (LUTCF) looked like your grandfather’s program and was not considered to be cutting edge,” he said.

Not so fast. The very next day, the CEO of NAIFA, Dr. Susan B. Waters responded:

To the Editors of InsuranceNewsNet, With a nod to Mark Twain, rumors of the LUTCF designation’s demise have been greatly exaggerated. The NAIFA Board of Trustees only recently learned of the American College’s decision to no longer provide curriculum support for the Life Underwriter Training Council Fellow (LUTCF) program. The board is currently considering what future opportunities may exist for NAIFA’s designation. Therefore, it is very premature to refer to the LUTCF in the past tense.

Since then, NAIFA has announced that it will have a new curriculum for the NAIFA LUTCF in September 2014 (hastening to add: “Course content from The American College will not be transferable to the new NAIFA LUTCF program.”).

Anyway, the American College is moving full-steam ahead with its new FSCP designation. So we get to witness the birth of a new financial designation. You can read more about this designation here. What’s clear is that the American College intends this new designation to compete with, and replace, the LUTCF. So the American College doesn’t hesitate to take jabs at the LUTCF:

The FSCP is designed to be a rigorous program that covers the holistic, comprehensive long-term needs of clients rather than focusing more narrowly on “selling product,” The American College said.

In addition, FSCP designees will be forbidden from sporting both the FSCP and the LUTCF:

Current LUTCF designees – there are approximately 68,000 of them – are welcome to use the letters after their name for as long as they want. Advisors, however, must choose between using either the LUTCF designation or the FSCP designation. They cannot use both, The American College said.

This will be one to watch. Can the American College pull off the introduction of a new credential? Will LUTCF be snuffed out?

Before leaving, a quick comment on the proliferation of designations is in order. There are so many financial designations these days that Finra has undertaken to provide some assistance on how to sort them all out. Finra lists a couple hundred of them here. Some advisors sport so many designations that it’s starting to look rather odd indeed. Remember Gary R. who commented on a Finra rule proposal here? He signed his letter: Gary R., CLU, ChFC, CFP®, LUTCF, AIF®, EA.

It turns out that Gary was not so impressive. More impressive is Assistant Professor Kevin M. Lynch of the American College. Behold:

Kevin M. Lynch, CFP®, ChFC®, CLU®, RHU®, REBC®, CASL®, CAP®, CLF®, LUTCF, FSS

Kevin M. Lynch, CFP®, ChFC®, CLU®, RHU®, REBC®, CASL®, CAP®, CLF®, LUTCF, FSS

And Lynch is not done yet! As he explains in a rather charming video, he is currently pursuing additional designations. One wonders if he will achieve the FSCP, and if so, will he sport the LUTCF or the FSCP? Because he can’t sport both! Frankly, I think the American College should make an exception for Mr. Lynch. It would be a shame to cut short that beautiful mane of designations.

Published by Jeremy L. Bartell

Let’s Look at Bernard Madoff’s BrokerCheck Report.

In November of 2013, Finra released an enhanced version of its BrokerCheck Report. It now includes a graphical timeline of disclosure events such as criminal convictions, customer complaints, lawsuits, and regulatory actions. Disclosure events appear as red dots along the time line. Long blue lines reflect time periods during which the broker was registered with a broker-dealer.

Bernard Madoff’s BrokerCheck report is rather striking in the new format. It contains a single long blue line representing an unblemished run of 49 years with his broker-dealer. In 2008, however, he picks up seven disclosure events depicted as seven red dots stacked on top of each other. Here is an excerpt of the chart from finra.org:

Each disclosure event is summarized later in the report. One of the disclosures is his criminal case. BrokerCheck notes that Madoff pled guilty to eleven felonies and received a 150-year sentence. But that’s not all. BrokerCheck’s summary leaves nothing out:

“upon release from imprisonment, the defendant shall be on supervised release for a term of 3 years on each count to run concurrently.”

The discerning investor, in vetting potential brokers, will no doubt detect the leniency afforded to Mr. Madoff by allowing his 3 years of supervised release to run concurrently on each count following his 150-year sentence. If he were truly a bad apple, a savvy investor might reason, his supervised release would run consecutively on each count.

The other six disclosures include the SEC civil case freezing his assets, the receivership placed upon his broker-dealer, and the revocation of his state securities registration by the great states of Illinois, Washington and Alabama.

Interestingly, there are no customer complaints on his BrokerCheck. That’s kind of funny if you think about it. Ordinarily those would each garner a red dot. And there are no customer lawsuits either. Now that’s not to say that Madoff’s customers were a satisfied lot. No, what’s happening here is Finra generally does not undertake to update BrokerCheck reports for those no longer registered. So we wondered what his report might look like if we tried to get at least his civil lawsuits on there. Counting the lawsuits is tricky. It’s almost easier to count those who have not sued Madoff. Anyway, here’s our visual approximation of what that might look like:

That’s hard on the mouse wheel to be sure, but it gives you the idea. Putting his permanent bar aside for a moment, such a BrokerCheck would present a formidable barrier to being hired at a broker-dealer upon his release from prison. That, and he’ll be over 220 years old.

Published by Jeremy L. Bartell

Finra Bars Broker for Padding Expense Reports

Expense reimbursement is a wonderful thing. Three-hundred dollars for dinner at the Four Seasons? No problem. Submit an expense report, get a check. It’s like magic. All you need are paper receipts. Paper does the trick.

Many soon realize it would be easy to create receipts at home. So easy, in fact, one must be careful to avoid making receipts that look too genuine, if you know what I mean. And it’s lucrative to be “reimbursed” for expenses not incurred. It’s tax-free income. But it can be career-ending for financial advisors. Finra recently barred a financial advisor from the brokerage industry for submitting false expense reports to Wedbush Securities, Inc., her former employer. She allegedly submitted fictitious expenses of $8,218.18, of which Wedbush paid $6,022.50. Wedbush later discovered the truth and terminated her. Finra then came knocking.

So what does Finra have to do with this? Well, two things really. First, her employer is a broker-dealer. Broker-dealers must keep certain “books and records.” The Finra Rule 4510 series governs this. Required records include certain accounting and finance records. By submitting false expense reports, a broker creates “inaccurate books and records,” as Finra sometimes puts it.

Second, there’s Finra Rule 2010, sometimes called the “catch-all” rule. This rule states, simply:

A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.

Nobody really knows what “high standards of commercial honor” means. It’s hard to define. It depends on the context. And the standards can change and evolve. It reminds me of a similar law in Massachusetts called Chapter 93A. It prohibits any “unfair or deceptive act or practice.” Courts have struggled to define an “unfair” practice. The best definition is from Justice Kass, then of the Massachusetts Appeals Court. He came up with this:

The objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.

Levings v. Forbes & Wallace, Inc., 8 Mass. App. Ct. 498, 504 (1979). That’s a great definition, but the Supreme Judicial Court didn’t think so:

We view as uninstructive phrases such as “level of rascality”

Mass. Emp. Ins. Exch. v. Propac-Mass, Inc., 420 Mass. 39, 42 (1995)

Broad and vague rules can be controversial – especially to those who want to walk close to the line. As Louis Brandeis reportedly once advised his clients: he could not tell them how to avoid falling off a cliff if they persisted in walking along the edge, but could tell them how to stay away from the edge. Of course, the vaguer the prohibition, the farther from the edge one must walk.

An inured man reacts.

So what do you think? Did this expense-account padding broker fail to “observe high standards of commercial honor”? It would certainly seem so. Does it matter if her alleged take was relatively small – the $6022.50 was spread over a four-year period. And what if expense padding is rampant in the industry – as some reports would suggest? For those of you inured to the rough and tumble of the world of commerce, did you find yourself raising an eyebrow when you heard of the alleged conduct here? Or did you shrug your shoulders and reflect back on some of your own creative expense reports? Most would agree that whatever the standard means, padding an expense account violates it.

But even so, was a permanent bar justified? With no possibility of re-entry, even if she is later fully rehabilitated? Here it’s hard to say whether that’s appropriate. She did not have a contested disciplinary hearing. She chose to settle the case with Finra and agreed to accept the bar. In the settlement (called a Letter of Acceptance, Waiver and Consent), she neither admitted nor denied Finra’s findings about her alleged wrongdoing. Perhaps had she taken the case to a hearing, she may have avoided a bar. But we’ll never know. We also do not know all the facts of her case. There is no requirement to put all facts into a Letter of Acceptance, Waiver and Consent. Still, for those tempted to pad the expense account, the lesson is clear. It is possible not only to get fired from a broker-dealer, but also to be permanently barred from all broker-dealers. For those interested, the Letter of Acceptance, Waiver and Consent is No. 2012033843101.

Published by Jeremy L. Bartell

Man Who Mocked the SEC in His Blog Has Been Indicted.

Remember Toby Scammell? The young man who allegedly learned of Disney’s plans to acquire Marvel Entertainment by peeking at emails on the Blackberry of his girlfriend, a Disney insider. His Marvel options trades ahead of the acquisition netted returns of over 3,000%. See The Blackberry Path to 3,500% Returns. When the SEC sued him for insider trading in August 2011, Scammell fought back boldly. He publicly criticized and mocked the SEC in a blog he created called “#SECFAIL.” This now defunct blog contained some funny stuff, such as this:

If the SEC understood how to read a bank statement or how call options worked then I wouldn’t be writing this. But this is the SEC – an incompetent government agency filled with bumbling lawyers who don’t understand the first thing about the markets they’re charged with regulating. They’re the financial regulatory equivalent of the DMV, except their lawyers lack domain expertise. I have no doubt a random selection of TSA screeners and postal workers would do a better job if their only training involved watching an hour of CNBC.

He also passionately defended his Marvel trades. He claimed his own research led to the trades, and not any information from his girlfriend who happened to be working on the planned acquisition for Disney.

Scammell in 2011
Visual Approx.

Although Scammell’s blog contained inadvertent admissions and likely only annoyed SEC attorneys, it was inspirational to watch the young man do battle with the SEC. Many observers secretly rooted for him. They admired his defiant refusal to back down, his public mocking of the agency, and the way he almost welcomed a fight against the larger, more powerful foe. He was like the Captain America of Marvel options traders.

And he fought alone!

Well, almost alone. On his side was the infamous R. Foster Winans, the former Wall Street Journal columnist, and convicted felon, who coauthored the widely read “Head on the Street” column in the early 1980s. Writing about the Scammell case for Business Insider, Winans also mocked the SEC:

The SEC has brought an insider trading case that is so trivial, so bone-headed, so absurd that you’d swear it was a piece of satire from The Onion.That it’s a real case suggests investigators at the SEC have too much time on their hands, and we should just make insider trading legal.

Winans Commenting on the Martha Stewart
Insider Trading Case

SEC Declares Educated Guessing Illegal, R. Foster Winans, 8/16/2011. As Winans reminds us, he’s something of an expert on the subject. He served 9 months in federal prison following charges of insider trading and wire fraud brought in 1985. His story is interesting.

In his columns, Winans would provide information about companies and would express his views on the performance of their stocks. His column was respected and widely read. Readers would react to the information in the columns, buying or selling the referenced stocks, and as a result, the contents of the columns could cause short-term moves in the prices of the stocks.

Two stockbrokers at Kidder Peabody realized they could profit if only they knew the contents of the columns before publication. A scheme was born when Winans agreed to provide this information to them in exchange for a cut of their trading profits. Winans shared information on 27 columns, resulting in trading profits of nearly $700,000. Winans received a cut of $31,000.

The scheme unraveled when Kidder Peabody noticed correlations between the trades of one of the brokers (and his client) and the columns. The SEC later opened an investigation. Winans and the brokers denied the scheme existed. Eventually, however, the conspirators started to quarrel with each other and Winans decided to reveal the scheme to the SEC.

Of the Current Justices Only Scalia Was on the Court for the Winans Case

Federal prosecutors then got involved. Winans was convicted of wire fraud and securities fraud. He appealed his convictions all the way to the U.S. Supreme Court. The Court affirmed his convictions in a split Opinion, and the Winans saga became a fixture in securities law textbooks.

It is unclear whether Scammell was happy to have Winans on his side. But it’s hard to miss the similarity between their respective approaches to writing about the SEC.

Despite Scammell’s valiant defiance, and the public support of the esteemed Winans, when the prospect of a jury trial came into sight, and the SEC and Scammell began their head-on drive towards each other, it was Scammell who swerved. He decided to settle. On June 6, 2012, he consented to an entry of judgment against him. He was ordered to pay disgorgement of ill-gotten gains, prejudgment interest and civil penalties, in an amount the court will later determine. It was a sad moment in David v. Goliath history. Toby Scammell Judgment. Later, in November 2013, an SEC administrative judge issued an Initial Decision barring Mr. Scammell from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or or nationally recognized statistical rating organization. In the decision, the judge notes that Mr. Scammell is now “remorseful.”

Scammell is Indicted

Any relief Scammell felt from resolving the SEC’s civil fraud case was short lived. On October 8, 2013, a federal grand jury returned an indictment charging Scammell with securities fraud and wire fraud based upon his trading in Marvel options (Toby Scammell Indictment).

This is a surprising turn of events. It has, after all, been over four years since Scammell’s Marvel options trades. Four years. And the criminal case is just beginning.

Now there are many reasons for delay, and often it is the defendant, not the government, causing the delay. But still. Starting a criminal action four years after the trades strikes many as a touch cruel, whether he’s guilty or not. The criminal matter itself will take years, if it runs its full course. Some feel this looks less like justice, and more like a war of attrition.

Attrition-Proof
(@mcuban twitter)

Regrettably, lengthy delay is a feature of our justice system. Consider, for example, the recent trial of Mark Cuban, the owner of the Dallas Mavericks, who was sued by the SEC in a civil fraud case over alleged insider trading in the stock of Mamma.com. The trial, which Cuban won, ended just a few days ago. Yet it centered on an eight-minute phone call that happened in June 2004, over nine years ago. The delay here is extreme. But Cuban is a billionaire. Attrition doesn’t work on him.

The indictment against Scammell is fairly detailed as far as indictments go. Perhaps this explains part of the delay. Maybe the prosecutors learned incriminating facts only after reviewing the documents the SEC obtained in its civil fraud case.

The indictment is also ugly. It paints the picture of a man who: (1) picked up bits of inside information from his girlfriend (or from her phone) concerning the identity of the acquisition target and the timing of the acquisition; (2) ran Internet searches on, among other things, “insider trading,” “material, non-public information,” and, ironically, “Mark Cuban”; (3) suddenly bought a large number of options on Marvel stock right before the acquisition; and (4) took specific steps to conceal the trades. In short, it paints the picture of a man who knew his actions were illegal – the essence of criminal activity. But that’s what indictments do. They paint a one-sided picture. The government still has to prove its allegations. Scammell of course has the right to defend himself. At this point, however, after years of SEC litigation, it would be astonishing if Scammell had any resources left to fight this criminal case.

Man indicted on securities fraud in Disney’s Marvel acquisition (latimes.com)

Published by Jeremy L. Bartell

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