(Reuters) Jan 3 – A former Jefferies Group Inc bond trader is going back on trial in federal court in Connecticut over whether he lied to customers about mortgage bond prices to boost profit. (Photo/Douglas Healey for Bloomberg)

The retrial of Jesse Litvak, with jury selection set for Wednesday and opening arguments for Thursday, comes 13 months after a federal appeals court voided his original conviction and two-year prison sentence.

But it gives U.S. prosecutors a fresh chance to crack down on alleged deceptive Wall Street sales tactics in the bond market, and could bolster cases against several other traders.

“The retrial will clear the air over whether bond traders can increase margins by falsely representing prices, which can distort trading and capital formation,” said James Cox, a Duke University law professor. “Whether someone relied on the information is irrelevant to prosecutions; it’s all about whether the underlying conduct is condemnable.”

C.J. Mahoney, a lawyer for Litvak, declined to comment, as did a spokesman for U.S. Attorney Deirdre Daly in Connecticut.

Litvak, who worked for Jefferies in Stamford, Connecticut, was charged in January 2013 with misleading customers about bond prices from 2009 to 2011.

This allegedly boosted the Leucadia National Corp unit’s profit by about $2.25 million, and his own pay.

Litvak has said his customers were sophisticated investors who were “inherently skeptical” of what counterparties tell them, and would have known if he were cheating them.

Convicted in March 2014, Litvak won a reprieve from the 2nd U.S. Circuit Court of Appeals in December 2015.

That court threw out fraud accusations related to the federal bailout known as the Troubled Asset Relief Program, and said Chief Judge Janet Hall, who oversaw the trial, wrongly excluded expert testimony for the defense.

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Retrial Starts for Jefferies’ Former Bond Trader

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Private Placement Memorandum: A Startup’s best friend for attracting investment.

If you are looking to raise capital for your business, you will inevitably need to utilize a document known as a private placement memorandum (PPM). This is a legal document that you can use to list down disclosures and selling points of your business for prospective investors. It is also known as offering document or offering memorandum.

When do you use a Private Placement Memorandum?

When it comes to selling equity in your company or raising capital via a debt offering for private enterprises in the United States, one needs to be more than familiar with and to follow the rules set forth by the Securities Act of 1933. This requires you to register yourself with the Securities and Exchange Commission (SEC). One of the core elements of the documents you must submit is to explain why the offering made by the business complies with SEC Regulation D, which allows exemption for some companies from registering with the SEC. Regulators in Europe and other regions typically impose similar and sometimes more rigorous standards.

Paul Azous, the Founder/CEO of Broker Dealer LLC, which operates private placement advisory firm Prospectus.com  “The PPM lists down the securities being sold, the terms set by the company and numerous other elements. Also included are the disclosures according to the exemptions used, investor profiles and detailed information of the terms. It will however not include a general offer for investment, making it the perfect tool for attracting investment.”

Where to start from?

Believe it or not, many businesses that rely on PPMs tend to work with templates found online, such as the PPM library, which contains more than 10,000 actual offering documents from companies in more than 100 countries and dozens of industries. Noted Azous, “In many cases, entrepreneurs seeking to raise capital will find themselves engaging a law firm that will charge anywhere from USD $25000 to upwards of USD $50,000 to create a PPM; but those legacy fees often prove to be out-sized when considering the deliverables.”

A PPM is a serious invitation for thoughtful and focused investors who want to know about your business, its future and most important, the profits that they can earn from it. If you go for ready-to-use templates from unreliable sources, you will likely end up with a dry, conventional PPM that will have numerous legal loopholes, which in turn can get you into trouble.

There are a variety of professional services focused on creating a bespoke PPM. This document will be tailored for your business and its prospective investors. The writer will work with you directly and use the information that you provide, ensuring that the final product highlights your company, its potential and why investors should take it seriously.

When you enlist professional PPM writing services, your business will be thoroughly analyzed by experts who will have a full understanding about your enterprise, along with identification of all the legal risks that can be obstacles for investment. They will also be able to identify the best possible approach for your business under the Regulation D of the SEC.

Will my lawyer help me in creating PPM?

A Private Placement Memorandum is a legal document. Using an experienced securities lawyer or a professional service provider specializing in the creation of investor documents makes good sense. However, while the PPM serves as a legal document; it is also a business marketing tool for you to attract investors. A lawyer should be able to draft a foolproof legal document, but in many cases they will lack in the creative thinking that is required to make your PPM attractive.

Professional service providers who specialize in private offerings should offer you advice, consultancy and insight about the best practices when it comes to attracting investors. They have presumably worked on PPMs for companies across a variety of industries, and ideally have cross-border experience to address the needs of Issuers based not only in the United States, but in multiple global jurisdictions as well. By choosing the right professional consultant, you will be working with people who actually know how to leverage a PPM document to raise equity for your company.

Contributor Samuel Goldberg is a 20 year private finance and investment banking veteran who currently serves as an independent consultant and a Board Advisor to PPM Group, a global advisory with offices in New York, London, Hong Kong and Tel Aviv. His knowledge base with respect to private placement documentation, capital formation and business consulting is based on dozens of projects in which he helped negotiate term sheets for multiple public offerings and private issuances that have raised nearly USD $2.5billion for a broad spectrum of companies. Mr. Goldberg’s area of expertise encompasses Reg D, Reg S and 144A issuance, stock exchange listing services, as well as the EB5 market.

2017 Best Practices for Private Placement Memorandums

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The indictment says that there was an agreement among ex PM Kang, and Sterne Agee executives Deborah Kelley and Gregg Schonhorn to pay Kang bribes in the form of “entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, luxury gifts, and cash payments” among other things, in exchange for fixed-income business.

us_v._kang_and_kelley_indictment.pdf by Chris Bragg

The value of the alleged bribe was more than $1 million, Bharara’s office said, including such gifts as trips to New Orleans and Montreal, a ski trip to Park City, Utah, a $17,400 luxury wrist watch, tickets to Broadway shows and the U.S. Open, cocaine and crack cocaine, as well as thousands of dollars for strippers and prostitutes.

Prospectus.com team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link -

Kang steered more than $2 billion in fixed-income business to the brokers, the indictment says, which resulted in millions in commissions.

(Reuters)-Dec 21 U.S. prosecutors on Wednesday accused a former portfolio manager at New York state’s retirement fund of steering $2 billion in trades in exchange for bribes from brokerage employees, in the latest pay-to-play case to rock the fund.

Navnoor Kang

Navnoor Kang, the ex-director of fixed income at the New York State Common Retirement Fund, was charged in an indictment filed in Manhattan federal court along with Deborah Kelley, a former Sterne Agee Group Inc managing director. Gregg Schonhorn, another broker-dealer whom prosecutors said paid bribes, was charged in related court filings (Reporting by Nate Raymond and David Ingram)

More Securities law news courtesy of Law360.com ….

• BREAKING: Ex-Blackrock Exec Jailed In UK For Insider Trading

  A former Blackrock investment manager was sentenced to 12 months in prison by a London court on Wednesday for insider dealing stemming from trades in energy companies in 2011, in another win for the Financial Conduct Authority.

• December 20, 2016
  

  Texas Man Charged With Bilking Investors In Ponzi Scheme

  A Texas financial adviser was arrested Monday on charges he cheated investors out of $6 million by selling unregistered securities in a purported digital advertising company that was really a Ponzi scheme, the Texas State Securities Board said.

• December 20, 2016
  

  Chancery Mulls Largest Incentive Award Ever In Occam Case

  The Delaware Chancery Court opened a rare trial Tuesday for a so-called incentive award for the lead plaintiff in the class action that challenged Occam Networks Inc. merger with Calix Inc., which proposed at roughly $3 million is believed to be largest of its kind in the court’s history.

• December 20, 2016
  

  RPM International Can’t Move SEC Suit Over $61M Deal

  A Washington, D.C., federal judge refused to move the U.S. Securities and Exchange Commission’s suit accusing government contractor RPM International Inc. of failing to account for a nearly $61 million settlement, saying Tuesday the Ohio company hadn’t proven it would be more conveniently heard elsewhere.

• December 20, 2016
  

  SEC, MSRB Fight GOP’s Challenge To New Pay-To-Play Rule

  The U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board told the Sixth Circuit on Monday that it doesn’t have jurisdictional standing to consider the Republican Party’s challenge to new rules that increase pay-to-play restrictions on municipal advisers, saying the rules were created “by congressional will” and not by a final SEC order that can be appealed.

• December 20, 2016
  

  Neustar Settles SEC Investigation Over Severance Clause

  Technology company NeuStar Inc. has agreed to pay $180,000 to end allegations that it violated a whistleblower protection rule by restricting what former employees were allowed to say about the company, the Securities and Exchange Commission announced Monday.

• December 20, 2016
  

  Energy Co. To Pay SEC $1.4M Over Whistleblower Firing

  The U.S. Securities and Exchange Commission reached its first settlement over internal-whistleblower retaliation Tuesday, with an Oklahoma energy company agreeing to pay $1.4 million, subject to a bankruptcy plan, to resolve claims it fired a worker for whistleblowing and used restrictive separation agreements.

• December 20, 2016
  

  SIFMA, ABA Air Worries Over CFTC Cross-Border Swaps Rule

  The Securities Industry and Financial Markets Association, the American Bankers Association and other swap market interest groups urged the U.S. Commodity Futures Trading Commission on Monday to hit the brakes on proposed definitions for U.S. and foreign entities under cross-border swap rules, underscoring potential harm to the U.S economy and potential regulatory overreach.

• December 20, 2016
  

  Schulte Roth Withdraws As Patriarch’s Counsel In Zohar Suit

  Schulte Roth & Zabel LLP told a New York federal judge Tuesday that it will no longer represent Lynn Tilton’s Patriarch Partners in a breach of contract case against investment funds previously managed by Patriarch, citing “irreconcilable differences.”

• December 20, 2016
  

  Chancery Won’t Revive Suit Over OM Group’s $1B Apollo Sale

  Delaware’s Chancery Court has said it will not allow OM Group Inc. shareholders to reargue their recently dismissed suit targeting the company’s board members over its $1 billion buyout by Apollo Global Management, finding that the court adequately considered the evidence at hand.

• December 20, 2016
  

  Tokai Hopes To Move $97M Suit Over IPO To Mass. Fed. Court

  Tokai Pharmaceuticals Inc. Monday sought to move a putative class action by investors claiming it withheld important drug testing information prior to its $97 million initial public offering to a Massachusetts federal court Monday.

• December 20, 2016
  

  4th Circ. Says FINRA Challenge Must Go To SEC First

  The Fourth Circuit on Tuesday found microcap broker-dealer Scottsdale Capital Advisors Corp. can’t challenge the Financial Industry Regulatory Authority’s power in federal court, because Congress gave exclusive review of FINRA rules and decisions to the U.S. Securities and Exchange Commission.

• December 20, 2016
  

  Citibank Renews Bid To Dodge $2.3B RMBS Class Action

  Citibank NA on Tuesday again asked a New York judge to toss a proposed class action accusing the bank of ignoring pervasive problems with residential mortgage-backed securities, saying precedent from a recent state appellate ruling supports its contention that the suit is inadequately pled.

• December 20, 2016
  

  Bondholders Dismissed From Bank Libor Conspiracy MDL

  A New York federal judge Tuesday dismissed a class of bondholders from multidistrict litigation accusing big banks of rigging the London Interbank Offered Rate, saying their alleged antitrust injuries were not caused by the banks.

• December 20, 2016
  

  Bankrupt Oil Co. Gives Preferred-Share Action The Slip

  A Manhattan federal judge dismissed a class action lawsuit against New Source Energy Partners LP and underwriters over the company’s $40 million 2015 preferred-share offering Monday, finding that the bankrupt oil and gas portfolio’s risk-disclosures were “precise” and “exhaustive” and did not run afoul of the securities laws.

• December 20, 2016
  

  Morgan Stanley Pays $7.5M For Customer Protection Offenses

  Morgan Stanley & Co. LLC agreed to pay $7.5 million Tuesday to settle allegations it violated the U.S. Securities and Exchange Commission’s Customer Protection Rule when using customer cash as collateral on loans used to finance hedging swap trades.

• December 20, 2016
  

  Del. Supreme Court Upholds Chancery On TC Pipeline Case

  Bare claims of unfairness cannot overcome a partnership’s valid “special approval” shields for company decisions, Delaware’s Supreme Court said Monday in a ruling that rejected a master limited partnership member’s appeal of a losing challenge to a $446 million TransCanada Pipelines deal.

• December 20, 2016
  

  $2.5M CFTC Spoofing Settlement Gets Green Light

  An Illinois federal judge on Tuesday signed off on a deal that settles a yearlong legal dispute between the U.S. Commodity Futures Trading Commission and a Chicago-based trader accused of placing spoof bids on futures markets and who has now agreed to pay $2.5 million to resolve the suit before a trial.

The post Three Charged in NYS Retirement Fund Pay-to-Play Scheme appeared first on BrokerDealer Blog.

Online retailer Overstock.com expects trading to begin on its blockchain-based alternative trading system before the end of the year, according to company officials.

The ATS will be operated by Overstock.com subsidiary TO as part of the company’s Medici Project, and it will only handle trades in the company stock, at least at first. So while it’s not an immediate competitive threat to the existing field of 13 U.S. stock exchanges plus several dozen ATSs, the initiative will be closely watched as a gauge of the potential of distributed-ledger technology in capital markets.

The ATS will write completed trades to its blockchain instead of routing them to the National Securities Clearing Corp., a subsidiary of Depository Trust & Clearing Corp., for clearing.

Overstock.com plans to prime the liquidity on the ATS through a new issue of corporate shares to existing shareholders the day before trading commences on the new trading venue.

T0 officials plan to formally announce its partnership with a broker-dealer on Sept. 12. “For those who want to trade on the ATS, they will have to create an account with the broker-dealer,” said Overstock’s man-in-charge Judd Bagley, who declined to name the brokerage firm.

BrokerDealer.com database of Global Broker-Dealers includes thousands of BDs in 30+ countries.

I WANT TO ACCESS BROKERDEALER.COM GLOBAL DATABASE

To continue reading the story from MarketsMuse.com, click here

The post Overstock.com’s Patrick Byrne To Launch Blockchain ATS for Stocks appeared first on BrokerDealer Blog.

For those not following the travails of Germany’s biggest investment bank and broker-dealer Deutsche Bank, suffice to say this bank has had its full share of comeuppance throughout the past many months. If nothing stings more than getting hit with a big fat fine from Finra, the sting is more palpable when its a $12.5 million smack for hooting and hollering confidential information over a company-wide ‘squawk box.’ Below courtesy of Business Insider columnist Portia Crowe:

(Business Insider) Aug 8-Deutsche Bank allowed potentially confidential research and trading information to be broadcast over internal speakers, according to the Financial Industry Regulatory Authority, or Finra.

That body fined Deutsche Bank $12.5 million after finding that the German bank was aware that broadcasts, known as “hoots” or “squawks,” contained potentially confidential or price-sensitive information but “repeatedly ignored red flags” suggesting it wasn’t adequately supervising the loud systems.

Traders regularly communicate across desks over internal speaker systems known as “squawk boxes.”

Global consultant Private Placement Services LLC offers a full suite of professional consulting and offering document preparation services for those seeking to raise money via a private placement of debt, equity or convertible securities. To learn more, visit PPM.co

At least one registered representative of the firm communicated potentially confidential and/or material nonpublic information to customers as a result of the supervisory deficiencies, according to a filing from Finra.

That provided the recipients with a potential informational advantage over other customers.

“Deutsche Bank’s disregard of years of red flags including internal audit findings, risk assessments, and compliance recommendations was particularly egregious given the risk that material nonpublic information could be communicated over squawk boxes,” Finra’s chief of enforcement, Brad Bennett, said in a statement.

Deutsche Bank neither admitted to nor denied the charges. The full story via this link to Business Insider

The post Deutsche Bank Steps in Doo-Doo, Again! appeared first on BrokerDealer Blog.

Not to mention the other requirement of MIFID II: strict requirements for soft-dollar commissions for research. When I started working on the trading floor, soft-dollar commissions were the way business was done. A quant (me) would generate trading ideas that would be subsequently distributed to the desk’s institutional clients. An example of a trading idea could be the economic rationale for why the futures prices on Canadian dollar were about to rise, and, hence why someone like a treasurer of a business with Canadian exposure would choose to buy the futures now, rather than wait for the quarter end. Clients choosing to trade on the research were invariably charged a spread with the cost of the research idea priced-in, and that was just business as usual.

In addition to the secret sauce that will be spilled by transparency requirements and the tight control of soft-dollar commissions, the last component of traditional brokerage businesses was quality relationship management. Can one differentiate a business by a friendly attitude and a free pint of beer? Of course, yes. However, a client can only drink so much beer on a given day, and the prospect of hanging out with yet another broker can be daunting, to say the least.

So where is the brokerage industry going under the new regulations? Technology is certainly not only enabling the requirements of transparency, it is also leveling the field as far as investors are concerned, making broker-shopping easy. How are brokers to retain their clients?

BrokerDealer.com maintains the largest database of broker-dealers across 35 countries

The answer once again lies with technology. Smart order routing solutions should enable brokers to compete for clients beyond beer outings and popular tickets. A solid example of someone who has been doing this well for the past decade in the U.S. equities is Pragma Securities: leveraging PhD-level research and the technology to deliver benchmark-beating routing to their clients. However, even Pragma cannot fully disclose its secret sauce – doing so would make it vulnerable to competition and likely affect its business considerably.

Irene Aldridge

Irene Aldridge is Managing Director, Head of Research and Development, AbleMarkets.com
and Able Alpha Trading, LTD. She is the author of High-Frequency Trading: A Practical Guide
to Algorithmic Strategies and Trading Systems. She can be seen at the Big Data Finance
conference at New York University on May 19 and 20, 2016. Irene can also be reached at Irene@AbleMarkets.com.

For the entire column from Traders Magazine, click here

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The settlement is the latest among big banks related to the financial crisis, bringing to a close government claims that Morgan Stanley told investors that the mortgages it packaged into securities were of higher quality than was actually the case. The firm’s misstatements cost investors billions of dollars and the problematic mortgages helped cause many homeowners to lose their homes or suffer significant financial losses, Schneiderman said.

“Today’s agreement is another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks,” Schneiderman said in a statement.

For the full story from Law360, please click here

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The advisory firm founder posts market commentaries, photos from conferences and other information on Facebook, LinkedIn, Twitter and the firm’s YouTube channel. Many of the posts are linked between the platforms and lead visitors back to the firm’s website.

“The breadth of information from us and about us on social media enables someone to go from curious to prospect to client in a short time frame,” said Mr. Edwards, who founded Heron Financial Group in 1993.

Advisers shouldn’t be afraid to jump on social media and see what works, he said. Through trial and error, advisers can evaluate which of the sites their clients and prospects are on and what topics garner the most interest, or “clicks.” Mr. Edwards directly asks for feedback about what followers do or do not like.

POLO AND SAILBOATS

He found publishing on WordPress to be fruitless, and believes not enough of his clients or prospects use Google Plus to invest the time in figuring that one out.

On the sites Mr. Edwards does frequent, he has found that posts with photos of people, such as smiling clients at a polo match or sailing on Mr. Edwards’ sailboat, generate a lot of attention.

Though social media is not expensive, advisers have to recognize it requires a time commitment. Mr. Edwards said he spends about an hour a day writing for and interacting through social media. It was an even bigger time-commitment just starting out.

Heron Financial Group‘s social media focus has helped position Mr. Edwards as an expert on particular issues, and has generated media attention for the firm, which saw its assets under management grow about 20% last year, to $205 million.

David Edwards

The direct results of a social media strategy can’t be evaluated in a traditional return-on-investment sort of way, but consider this: Even if a post doesn’t directly cause a client to walk through an adviser’s door, few clients will bother to come to an adviser before first checking them out online. Who knows which commentary or smiling client photo will get them to pick up the phone.

Tip sheet:

• Do not put boring headlines on posts; people respond to fear and photos. A recent market commentary from Heron was titled: A Client Asks, “What’s the Worst Case Scenario?”

• Hire a consultant to help develop a social media strategy and evaluate how well the platforms are working for your firm.

• Never write something on social media that you wouldn’t want to see in the Wall Street Journal.

• Make sure any communication through a social media network is archived, as required by the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc.

• Advisers must stay within the compliance guidelines of their firm and regulators, including rules against touting a specific product or investment, or posting performance data.

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As FINRA examiners make their rounds this year, they will put firms’ culture under the microscope. Wall Street’s chief regulator is turning its attention to the tone set by senior leaders and supervisors, asking whether the culture they create supports compliance, risk management and ethical conduct throughout the  brokerdealer organization.

The industry regulator last week published its annual letter outlining its examination priorities for the new year, putting the industry on notice that, along with firm culture, FINRA examiners will be looking broadly at issues around supervision and liquidity, as well as a host of other areas ranging from cybersecurity to how brokers work with elderly clients.

In a statement accompanying the exam-priorities letter, FINRA CEO Richard Ketchum explains that the focus on culture comes in response to the failure of too many firms to establish a compliance-driven ethos that rejects self-dealing and where brokers and advisors consistently place clients’ interests ahead of their own.

“Nearly a decade after the financial crisis, some firms continue to experience systemic breakdowns manifested through significant violations due to poor cultures of compliance,” Ketchum says. “In 2016, FINRA will be looking for firms to focus on their culture and whether it is putting customers first and promoting risk management adaptable to a changing business environment.”

Not One-Size-Fits-All

While FINRA says that it plans to “formalize” its method for assessing a firm’s culture in 2016, the industry regulator insists that it is not going to be overly prescriptive and hold brokers to a one-size-fits-all standard for what an appropriate culture should look like.

“Our goal is not to dictate a specific culture, but rather to understand how each firm’s culture affects compliance and risk management practices,” Ketchum says.

At the same time, FINRA is working toward a more objective set of criteria to evaluate the culture of a firm, and says that it will complete the review of incentives and conflicts of interest in the retail brokerage sector that it began late last year. Through those sweep exams, FINRA has been collecting information on how firms navigate conflicts of interest in areas like proprietary products and the compensation structure for registered reps.

The mechanism for evaluating a firm’s culture that FINRA expects to finalize in 2016 will draw on five criteria:

Whether control functions are valued within the organization

Whether policy or control breaches are tolerated

Whether the organization proactively seeks to identify risk and compliance events

Whether immediate managers are effective role models of firm culture

Whether sub-cultures (such as at a branch office or trading desk) that may not conform to overall corporate culture are identified and addressed
FINRA explains that it expects firms to take “visible actions” to mitigate conflicts of interest and promote the clients’ interests, and to adopt a zero-tolerance policy for violations of the organization’s protocols.

Additionally, FINRA intends to focus on the four areas where it has observed firms falling down in their supervisory procedures: Conflicts of interest, Technology, Outsourcing, and Anti-money laundering programs.

Cybersecurity will be a chief focus as examiners review firms’ technology operations. Officials at FINRA and the SEC have been warning the industry to sharpen its focus on protecting information systems and client data in the face of constantly evolving and widely varied cyber threats.

“While many firms have improved their cybersecurity defenses, others have not — or their enhancements have been inadequate,” FINRA cautions in its letter.

This article originally appeared on the website of Traders’ sibling publication Financial Planning.

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Jarred Kessler, Former Head of Equities for Cantor Fitzgerald

In addition, FINRA suspended Jarred Kessler, executive managing director of equity capital markets, for three months in his principal role at the firm and fined him $35,000 for supervisory failures, while equity trader Joseph Ludovico was suspended for two months and fined $25,000. The suspension is a moot point, as Kessler resigned from his role as head of equities for global broker Cantor last week. The regulator also sanctioned Cantor for not having adequate supervisory or anti-money laundering programs to detect “red flags” or suspicious activity tied to its microcap activity.

“If a broker-dealer is looking to increase its revenues by expanding a high-risk business line, the firm and its supervisors must tailor their supervision to the risks associated with those businesses. This is especially true when the new business involves the mass liquidation of microcap securities, which presents overwhelming risks of fraud and investor harm,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a statement.

“FINRA has no tolerance for firms and business executives who choose to engage in this business without robust systems designed to ensure that they do not become participants in illegal, unregistered distributions,” Bennett said.

In settling this matter, Cantor Fitzgerald neither admitted nor denied the charges, though it did consent to FINRA’s findings.

According to FINRA, the broker-dealer did not sufficiently guide or train employees in the sale of billions of thinly traded microcap shares. Furthermore, it did not put into place an anti-money laundering program to detect patterns of potentially suspicious money laundering activity related to these sales.

Kessler, it says, knew that the expanding microcap business “posed unique challenges and was generating an increasing number of regulatory inquiries, but nonetheless delegated his supervisory responsibilities to a central review group without taking sufficient steps to investigate the adequacy of their efforts.”

Kessler resigned from the firm last week, ending a 5-year stint as head of equities. Cantor Fitzgerald declined to comment on the matter.

Following his departure, Kessler’s responsibilities will be handled by members of Cantor Fitzgerald’s executive management for equities Adam Mattessich, Darren Taube, and Peter Cecchini, according to a person with knowledge of the move, who asked not to be identified discussing a private matter. An external spokesman for the investment bank at Powerscourt in London didn’t return phone calls requesting comment about the replacements.

Cantor Fitzgerald’s Howard Lutnick hired Kessler in January 2011 as part of a push to transform the company from a bond broker into a full-service investment bank. Kessler, who joined from Credit Suisse Group AG, previously held roles with Morgan Stanley and Goldman Sachs Group Inc.

Cantor has offices in more than 30 locations globally and employs about 1,600 people.

For the Bloomberg LP rendition of the story, please click here

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