Broker-Dealer Litigation - Greenberg Traurig LLP

(iii)
Falsification of Documents
Q.1.c.(iii)
In re Peperno, Release No. 65018, 2011 SEC LEXIS 2649 (Aug. 3, 2011).
The Commission accepted an offer of settlement from Peperno, a former registered
representative with a registered broker-dealer. In an earlier criminal proceeding, Peperno
pleaded guilty to one count of mail fraud and was sentenced to forty-three months of prison
followed by five years of supervised release. The criminal indictment alleged that Peperno
invested funds from at least nine customers in high-commission real estate investment trusts by
forging their signatures or otherwise falsifying information on their account application
documents. These actions generated at least $54,089 in commissions for Peperno over a thirtytwo
month period. The indictment also alleged that he misappropriated $380,000 from two
customers by converting their funds to his own use. The Commission barred Peperno from
association and from participating in any offering of a penny stock.
(iv)
Failure to Maintain Accurate Books and Records
Q.1.c.(iv)
In re Legend Sec. Inc., Release No. 64502, 2011 SEC LEXIS 1726 (May 16, 2011).
The Commission accepted an offer of settlement from Legend Securities, Inc., a registered
broker-dealer (the “Firm”), and Caruso, a registered representative and the Firm’s President and
CCO. The Commission alleged that in response to multiple requests from the Commission for a
particular employee’s personnel file, Caruso, after first failing to respond, caused the employee
to sign and back date certain records to the date that the employee became a registered
representative at Legend. The Commission alleged that Caruso then provided these documents
to the Commission without disclosing the backdating. Respondents were censured and ordered
to cease and desist from committing or causing any violations and any future violations of
Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder. Legend was ordered
to pay a $50,000 civil penalty and Caruso was ordered to pay a $25,000 civil penalty.
d. Mutual Fund Trading and Disclosure Violations
Q.1.d
In re Charles Schwab Inv. Mgmt., Release No. 63693, 2011 SEC LEXIS 120 (Jan. 11, 2011).
The Commission accepted offers of settlement from Charles Schwab Investment
Management (“CSIM”), a registered investment adviser, Charles Schwab & Co., Inc.
(“CS&Co.”), a registered broker-dealer, and Schwab Investments, an open-end investment
management company. In a related proceeding brought by the Commission, a federal district
court entered judgment by consent against CSIM and CS&Co., ordering them to pay
disgorgement, pre-judgment interest and civil penalties. The Commission’s complaint alleged
that CSIM and CS&Co. misled investors by inadequately disclosing the characteristics of an
ultra-short bond fund that was comprised of a series of Schwab Investments (the “Fund”). In
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