The SEC now undercharges a firm who made a whopping $290 million illegally, facilitating billions of shares without proper registration.
The Securities and Exchange Commission (SEC) has charged Palos Management Inc., an investment adviser based in Montreal, along with its portfolio manager Robert Mendel, for providing brokerage services without the necessary registration as a broker-dealer or affiliation with a registered broker-dealer.
According to the SEC’s findings, from around July 2019 to February 2022, Palos and Mendel facilitated the trading of over 37 billion shares of penny stocks for U.S. clients without proper registration.
The SEC’s order states that beginning in early 2019, Palos and Mendel handled the purchase and sale of these penny stocks, generating nearly $290 million in proceeds.
They assisted clients by opening custodial accounts with financial institutions, removing restricted legends from shares, accepting orders with specific volume and price limits, executing trades with brokers, and managing the settlement of transactions and wiring of proceeds.
For these brokerage services, the respondents received transaction-based compensation that was separate from their investment advisory fees. Neither Palos nor Mendel was registered as a broker-dealer or associated with one.
The SEC found that Palos and Mendel willfully violated Section 15(a)(1) of the Securities Exchange Act of 1934.
Without admitting or denying the findings, they agreed to stop future violations and accept a censure.
Palos will pay a civil penalty of $575,000, while Mendel will pay $35,000 and face a three-year bar from dealing in penny stocks.
The investigation was led by Drew Grossman and Steven Susswein, under the supervision of Pei Chung and Stacy Bogert, with assistance from Brian Palechek and Christopher Bruckmann.
The SEC also thanks the Autorité des Marchés Financiers of Quebec for its support during the investigation, as stated in its latest press release.
Was the firm undercharged compared to the hundreds of millions of dollars it generated?
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Also Read: TD Bank Now Gets Caught With Illegal Market Manipulation
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