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Compliance Corner: SEC

Editorial Staff, September 24, 2020


The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

The Securities and Exchange Commission has settled charges against a Colorado man for defrauding investors, including cadets at the US Air Force Academy.

For a two-year period, Milton J Dosal, Jr raised nearly $100,000 from around 41 investors under the guise that he would day-trade stocks on their behalf. 

According to the SEC’s complaint, Dosal, a “car enthusiast”, met a number of investors through car club events, including an Air Force Academy cadet. Dosal then then gained access to other cadets who he convinced to invest with him. The complaint alleges that Dosal falsely held himself out as a securities professional and misled investors about his trading activity and their investment returns. 

The complaint further alleges that Dosal’s empty promises included telling investors that they could, with little risk, expect weekly returns of up to 10 per cent. Dosal also allegedly used fake stockbroker agreements and false account balances for some investors. The complaint alleges that Dosal used investor funds for personal expenses and diverted new investor funds to pay back prior investors, in a Ponzi-scheme fashion.

“As alleged in our complaint, Dosal enticed military service members and others to invest with false claims that he was a highly successful day-trader,” Kurt Gottschall, regional director for the SEC’s Denver regional office, said. “The SEC will continue to vigilantly pursue fraudsters who prey upon those who serve our nation.”

Without admitting or denying the allegations in the SEC’s complaint, Dosal consented to the entry of a final judgment permanently enjoining him from violating the antifraud and broker-dealer registration provisions of the federal securities laws. Dosal also agreed to return $51,633 of allegedly ill-gotten gains plus prejudgment interest of $3,503, and to pay a $51,633 civil penalty.

The Securities and Exchange Commission announced an award of $2.4 million to a whistleblower whose actions prompted the agency to start an investigation and bring an enforcement action that stopped misconduct. 

In custom with its practice, the US regulator did not disclose the name of the person or the misconduct in question. 

"The whistleblower awarded today quickly came forward with critical information and helped investigative staff target key information and identify important witnesses," Jane Norberg, chief of the SEC's Office of the Whistleblower, said. "Information from whistleblowers has again proven to be crucial in helping the Commission detect violations and better protect investors and the marketplace."

The SEC has awarded about $523 million to 97 individuals since issuing its first award in 2012. This marks the sixth award the Commission has made in the past three weeks alone. 

Whistleblower awards can range from 10-30 per cent of the money collected when monetary sanctions exceed $1 million.

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